I’d like to mention that I’m not exactly up to date with AI related legislation so treat what I’m about to write as a genuine attempt to understand their worries rather than trying to be smart.
I remember there being a lot of uncertainty about the legality of what and how can('t) be used in training models (especially when used for commercial purposes) - has that been settled in any way? I think there was also a case of not being able to copyright AI generated content due to lack of human authorship (I’d have to look for an article on this one as it’s been a while) - this obviously won’t be a problem if generated assets are used as a base to be worked upon.
As for illegal content - Valve mentioned it in regards to live-generated stuff. I assume they’re worried about possibility of plagiarism and things going against their ToS, which is why they ask about guardrails used in such systems. On a more general note, there were also cases of AI articles coming up with fake stories with accusations of criminal behavior involving real people - this probably won’t be a problem with AI usage in games (I hope anyway) but it’s another sensitive topic devs using such tools have to keep in mind.
Again, I’m nowhere near knowledgeable enough to write this stuff from a position of confidence so feel free to correct me if any of this has been dealt with.