Seventh Circuit Shields In-Home AI Virtual CSAM Possession While Production, Distribution, and Transfer Charges Stand
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National Center for Missing and… Supreme Court Department of Justice Seventh Circuit Congress
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The U.S. Court of Appeals for the Seventh Circuit held on August 25, 2026, in United States v. Steven Anderegg, No. 25-1354, that 18 U.S.C. § 1466A(b)(1) is unconstitutional as applied to private, in‑home possession of obscene AI‑generated imagery that does not depict an actual child.
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Judge John Z. Lee, joined by Judges Doris L. Pryor and Joshua P. Kolar, treated Stanley v. Georgia (1969) and Ashcroft v. Free Speech Coalition (2002) as binding: the government may not criminalize what a person keeps at home when no real minor was used in production.
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Osborne v. Ohio (1990) and New York v. Ferber (1982) did not control because those cases rest on harm to actual children.
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Open‑source image models such as Stability AI’s Stable Diffusion can be run locally; the same stack that generates ordinary pictures also generates photorealistic virtual CSAM.
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The Department of Justice charged the Holmen, Wisconsin software engineer in the Western District of Wisconsin (3:24‑cr‑00050) with producing and distributing the material and with transferring it to a minor under sixteen.
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Chief Judge James D. Peterson dismissed only the possession count; the Seventh Circuit affirmed that narrow dismissal and left the other counts intact.
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The case reached investigators after Meta’s Instagram reported messages to the National Center for Missing and Exploited Children.
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That pipeline—platform tip, NCMEC CyberTipline, search warrant, devices—still applies to production, distribution, and contact with a real child.
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Morphed images that alter a photograph of an actual child remain fully prosecutable.
Morphed images that alter a photograph of an actual child remain fully prosecutable.
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The legal line the panel drew is possession of wholly synthetic files that stay inside the house, not a license to make, share, or send them.
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Lee wrote that today’s generative models can render images “virtually indistinguishable” from records of actual abuse, a capability “likely unimaginable” when Free Speech Coalition was decided.
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He and Kolar concurred that the Supreme Court should revisit the intersection of the First Amendment and virtual CSAM if a proper case arrives.
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They also noted research that some training sets have contained real CSAM, a link the government did not develop on this record.
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Congress and state legislatures have moved in the opposite direction of the panel’s result: federal obscenity statutes still reach production and distribution of virtual depictions, and multiple states have enacted statutes aimed at AI‑generated CSAM.
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A possession carve‑out in one circuit invites forum‑shopping, harder proof that a file depicts a real child, and pressure on platforms and Stability AI‑class vendors whose tools are dual‑use by design.
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Oversight remains after‑the‑fact prosecution of production, distribution, and transfer, plus whatever the Supreme Court or Congress does next.
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The panel said it was not free to redraw the lines and asked for new guidance.
The panel itself said it was not free to redraw the lines and asked for new guidance.
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The conduct still faces three live federal counts in Steven Anderegg’s case.
The conduct still faces three live federal counts in Anderegg’s case.
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A First Amendment holding about what may sit on a hard drive at home does not erase the harm model, the training‑data problem, or the fact that sending the same files to a real minor remains a crime.
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