A federal appeals court has ruled that the First Amendment protects at-home possession of entirely synthetic child sexual abuse images under the narrow circumstances of a Wisconsin case, creating a sharp legal contrast with Texas law, which criminalizes possession of qualifying computer-generated depictions.
The three-judge U.S. Court of Appeals for the Seventh Circuit panel upheld the August 25 dismissal of one count against Steven Anderegg. The decision left intact charges accusing him of producing and distributing the images and transferring obscene material to a 15-year-old boy.
Judge John Z. Lee wrote the panel opinion, which held that the federal prohibition on possessing obscene virtual child sexual abuse material was unconstitutional as applied to Anderegg’s alleged possession inside his home.
Texas lawmakers had already taken a tougher approach. As previously reported by The Dallas Express, the Texas House approved Senate Bill 20 by a 139-0 vote in 2025, advancing criminal penalties for possessing or promoting obscene AI-generated depictions of children.
Court says precedent controls
The government conceded that the images connected to the possession charge did not depict an actual child and could not be linked to one, according to the opinion.
The panel relied on Stanley v. Georgia, a 1969 Supreme Court decision protecting the private possession of obscene material inside the home, and Ashcroft v. Free Speech Coalition, a 2002 decision involving computer-generated sexual depictions that did not use real children.
The judges distinguished the case from Supreme Court rulings allowing governments to outlaw possession of abuse images involving actual children. Those decisions rested on the government’s compelling interest in protecting identifiable victims and eliminating the market for images documenting their abuse.
The panel wrote that “we have some concerns about the lines these cases draw, but we are not free to redraw them ourselves.”
The decision addressed only the government’s effort to punish Anderegg for possession in his home. It did not shield producing, distributing, transmitting or transferring the material.
Prosecutors allege thousands of images
The Justice Department alleged after Anderegg’s 2024 arrest that he used the Stable Diffusion text-to-image model to create thousands of realistic sexual images depicting prepubescent minors.
Authorities linked the account to Anderegg after Meta reported an Instagram message containing suspected AI-generated child sexual abuse material to the National Center for Missing and Exploited Children. Prosecutors accused Anderegg of explaining his image-generation process to a 15-year-old boy and sending several images to him.
Investigators searched Anderegg’s home and electronic devices. The appellate opinion described hundreds of images found during the investigation, while the Justice Department alleged that he had created thousands.
Judges warn technology has changed
The panel said modern AI can create virtual abuse images that viewers may struggle to distinguish from images involving real children. It nevertheless concluded that lower courts must follow Supreme Court precedent unless the justices change it.
Lee and Judge Michael Y. Kolar wrote separately that courts would benefit from additional Supreme Court guidance. They cited concerns that synthetic images can burden investigators, disguise genuine abuse material and potentially rely on training data that includes images of real victims.
Ruling creates potential test for Texas law
Texas law criminalizes knowingly possessing, accessing or promoting obscene visual material that appears to depict a child, regardless of whether the depiction shows an actual child or was created through artificial intelligence, animation or another process.
The Seventh Circuit hears appeals from Illinois, Indiana and Wisconsin and does not bind courts in Texas, which falls within the Fifth Circuit. The panel did not decide the validity of the Texas statute, and the ruling does not prevent Texas authorities from enforcing it.
A defendant prosecuted solely for possessing entirely synthetic images at home could invoke the same Supreme Court precedents, potentially forcing Texas courts to decide how those decisions apply to the state law. Unless a court blocks or invalidates the statute, it remains in force.
AI exploitation reports surge
As previously reported by The Dallas Express, the National Center for Missing and Exploited Children documented a surge in reports involving AI-generated abuse material. NCMEC data show that more than 182,000 CyberTipline reports in 2025 involved people possessing, generating or attempting to generate AI child sexual abuse material. The organization has also identified actual children whose existing abuse images were manipulated with AI to create new material.
The Seventh Circuit ruling does not address images derived from or depicting an identifiable real child. It also leaves Anderegg’s production, distribution and transfer charges intact.
An indictment contains allegations. The law presumes Anderegg innocent unless prosecutors prove him guilty beyond a reasonable doubt.
Provided by Dallas Express
