Permissive licenses like MIT, Apache-2.0, and BSD-3-Clause dominate open-source AI, signaling that artifacts like models, datasets, and code can be freely used, modified, and redistributed. However, these licenses carry mandatory requirements: include the full license text, provide a copyright notice, and preserve upstream attribution, that remain unverified at scale. Failure to meet these conditions can place reuse outside the scope of the license, effectively leaving AI artifacts under default copyright for those uses and exposing downstream users to litigation. We call this phenomenon ``permissive washing'': labeling AI artifacts as free to use, while omitting the legal documentation required to make that label actionable. To assess how widespread permissive washing is in the AI supply chain, we empirically audit 124,278 dataset $\rightarrow$ model $\rightarrow$ application supply chains, spanning 3,338 datasets, 6,664 models, and 28,516 applications across Hugging Face and GitHub. We find that an astonishing 96.5\% of datasets and 95.8\% of models lack the required license text, only 2.3\% of datasets and 3.2\% of models satisfy both license text and copyright requirements, and even when upstream artifacts provide complete licensing evidence, attribution rarely propagates downstream: only 27.59\% of models preserve compliant dataset notices and only 5.75\% of applications preserve compliant model notices (with just 6.38\% preserving any linked upstream notice). Practitioners cannot assume permissive labels confer the rights they claim: license files and notices, not metadata, are the source of legal truth. To support future research, we release our full audit dataset and reproducible pipeline.