Hi friend,

Most mental health AI businesses have chosen to avoid regulation.

They see the process as costly and the rewards as uncertain. A historical analysis of mental health businesses that have pursued regulatory authorisation would support their decision (see Pear, Akili and more).

Perhaps they are correct. However, like all strategy, this choice has tradeoffs.

The majority of mental healthcare spending is on clinical activities that involve diagnosing, treating or managing mental health conditions — activities that are typically subject to medical regulation. Companies that restrain their AI products to non-regulated activities (like coaching, note-taking, or mood tracking) limit their addressable market. Many hope payers will eventually pay for non‑regulated tools if they can show value. But as of today, such payment remains scarce. Avoiding regulation entirely risks ending up in a smaller, increasingly crowded market — while the larger, higher‑value clinical space remains tied to authorised, clinician‑integrated tools.

Most founders (and their investors) may be allergic to regulatory pursuits. But when everyone is zigging, should some zag? 

The answer to this question depends on the ROI leaders can expect. The numerator of this equation is determined by the market size for authorised products and whether the organisation believes they can capture that market — this is where previous businesses have failed. 

The denominator is determined by the process of regulatory authorisation — the likelihood of getting authorised as well as the cost and time associated with such a process. For many, this process is unclear. Regulations can be difficult to understand and vary across jurisdictions. As AI prevalence has increased, the regulations themselves are changing too. Where they will go next and the burden that will place on organisations, is an important question for mental health leaders to understand.

In this three-part Hemingway Guide, we attempt to answer those questions, providing clarity on how regulators are approaching mental health AI products in 2026 and what we might expect in the future. To create this series, we’ve teamed up with May Lee, a regulatory professional of 12 years, with expertise in software and AI as medical devices. May has an engineering and legal background, as well as a deep understanding of the complex landscape of AI in healthcare and how it applies to mental health AI products specifically. 

In Part I of this series, we will provide a 101 on medical device regulation and how it applies to mental health AI products. We will also provide an overview of the current state of US regulation of mental health AI, how it is evolving and what it means for people building in this space. Parts II and III will focus on Europe, the UK and a deep dive into Predetermined Change Control Plans and other hot topics of debate in this space.

Let’s get into it.