Synthetic data is increasingly important in data usage and AI design, creating novel legal and policy dilemmas. All too often, discussions of synthetic data treat it as entirely distinct from “real,” collected data, overlooking the risks posed by different kinds and uses of synthetic data. This piece comments on Michal Gal and Orla Lynskey, which persuasively argues that synthetic data will transform information privacy, market competition, and data quality. While the risks posed by synthetic data depend on its connection to collected data, we argue that background knowledge and assumptions about ground truth used to create it are at least as important. We bring that focus to Gal and Lynskey’s taxonomy of synthetic data, arguing that it is essential to grasp synthetic data’s legal and policy implications. As such, we divide synthetic data into (1) transformed data, which modifies collected data to preserve certain statistical properties for an end use; (2) augmented data, which relies on assumptions to bolster a collected dataset’s fidelity to the ground truth; and (3) simulated data, which relies almost entirely on background knowledge and ground-truth assumptions. As policymakers weigh whether to incentivize, mandate, or discourage the use of synthetic data, they should consider the validity of the ground-truth assumptions used in producing that data.