Watching the Watchers: Navigating Surveillance Tech in a Privacy-Conscious Era

The rapid integration of surveillance technology into law enforcement has ignited a fierce debate between public safety imperatives and civil liberties. From AI-generated police reports to facial recognition systems, 2025 has seen a surge in tools designed to enhance crime prevention, but these advancements now face mounting scrutiny. As media exposes cases of overreach—from New Orleans' controversial AI camera network to San Francisco's circumvention of facial recognition bans—investors must weigh the growth potential of surveillance tech against the risks of regulatory backlash and public distrust.

The Tension Between Safety and Privacy

The New Orleans incident exemplifies the challenges at the heart of this conflict. A nonprofit-operated AI camera system, deployed to track wanted individuals, bypassed local regulations restricting facial recognition to violent crimes. While the technology contributed to arrests after a terror attack and jailbreak, civil liberties groups condemned its lack of oversight. The backlash forced the New Orleans Police Department to suspend the system, underscoring the fine line between innovation and overreach.

Meanwhile, cities like Milwaukee are proposing deals to share jail booking photos with private firms for facial recognition access—a move critics argue risks racial profiling. Even as agencies like the FBI and DHS expand social media surveillance, critics highlight disproportionate targeting of marginalized communities, from Black activists to Muslim immigrants.

Legislative Pushback: A Balancing Act

States are scrambling to regulate these tools. Georgia's AI Accountability Act mandates government agencies to develop usage plans, while Connecticut's laws prohibit surveillance-based price discrimination and AI-driven rental pricing. California's bans on affinity-based algorithmic pricing and deceptive chatbots signal a broader trend toward transparency. Hawaii's moves to audit government AI use and Colorado's public safety protections for AI deployments further illustrate the push for oversight.

However, the regulatory landscape remains fragmented. While some states clamp down, others lag behind, creating a Wild West dynamic for companies. reveals its 40% rise since 2023, driven by its non-biometric tracking system, "Track," which avoids facial recognition laws. Conversely, Axon Enterprises (AXON), a leader in body cameras, faces headwinds as agencies grapple with AI ethics—a stock that has stagnated despite its market dominance.

Investment Implications: Selectivity is Key

The surveillance sector is bifurcating into winners and losers. Companies prioritizing ethical AI frameworks and compliance with emerging regulations are likely to thrive. Veritone's focus on non-biometric tracking (e.g., clothing patterns) positions it well to navigate biometric bans. Similarly, Palantir (PLTR), which partners with governments on data analytics, could benefit from demand for robust oversight tools.

Meanwhile, firms relying on controversial facial recognition—like Clearview AI—face existential risks as more cities ban the technology. Investors should also monitor the SSGA SPDR SSGA Public Safety ETF (XPS), which tracks companies in security, defense, and emergency services. Though the ETF has dipped 8% since 2024 due to regulatory uncertainty, it offers diversification amid sector fragmentation.

The Bottom Line

Surveillance technology's growth is undeniable, but its trajectory hinges on navigating civil liberties concerns. Investors should favor companies that:
1. Develop regulation-friendly tools (e.g., non-biometric systems).
2. Prioritize transparency and diversity in AI training data to mitigate bias.
3. Engage with policymakers to shape ethical standards rather than resist them.

While the sector's long-term potential remains strong, short-term volatility is inevitable as courts and legislatures redefine boundaries. For now, the safest bets are those that align innovation with accountability—and watch as the debate between “safety” and “privacy” continues to shape this landscape.

Consider the risks: Regulatory shifts could disrupt revenue streams, and public backlash may erode trust in even the most advanced technologies.