Why AI companies should develop child-friendly smart toys and how to incentivize them

AI-enabled smart toys come in an exponentially growing diversity and inhibit the most known social environments of children. The Market Research Future group, for instance, projects that the global market share of such toys will grow by 26% and reach 107.02 billion USD by 2030. Smart toys, as highlighted by the Generation AI Initiative of the World Economic Forum, can exhibit highly positive effects on children's development when designed responsibly. Complaints received by the Federal Trade Commission (FTC) as well as an investigation of the Norwegian Consumer Organisation and rich scholarly research however also point to the severe impacts that smart toys can have on children's development. The non-transparent ways in which some smart toys exchange data for algorithmic analysis with other AI-enabled devices, e.g., through Bluetooth connection, demonstrate how weak cyber security features can violate children's privacy and jeopardize safety.