xAI sues Minnesota over $500,000 nudification ban, citing free speech

Elon Musk's xAI is challenging Minnesota's first-of-its-kind ban on AI nudification technology, arguing the law's $500,000-per-violation penalty chills protected speech.

xAI, the artificial intelligence company now owned by SpaceX, sued Minnesota Attorney General Keith Ellison on Monday to block a state law banning apps that generate non-consensual sexualized images, calling the statute an unconstitutional restriction on free speech.

"The statute imposes an overbroad, content-based ban on free speech and the tools of visual expression in a clumsy attempt to prohibit nudification," xAI's attorneys wrote in the complaint filed in Minnesota federal court.

The law, set to take effect Aug. 1, imposes a $500,000 fine per violation and allows victims to sue app owners for damages. It was passed in April after State Sen. Erin Maye Quade learned a man had used social media photos to create sexualized images of more than 80 women without their consent. The measure cleared the Senate 65-0.

The lawsuit marks the latest clash between Musk's companies and state-level AI regulation. X Corp. sued Minnesota last year over a separate deepfake election law, a case now pending in federal appeals court. The Trump administration has said it will challenge state AI laws, arguing a patchwork of conflicting rules undermines innovation.

xAI said it does not contest Minnesota's goal of prohibiting nonconsensual AI-generated nude images. But the company argued the law goes further by imposing strict liability on providers regardless of safeguards, including technological blockers that prevent users from generating sexualized content. The company has already sued a South Carolina man accused of using Grok to create child sexual abuse images, according to Reuters.

The complaint also said the law's definition of "intimate part" is overly broad, potentially banning depictions of men without shirts or people in swimsuits — images "far beyond what an ordinary person would consider nudification." xAI said it will have to restrict image-editing features for Grok Imagine once the statute takes effect.

AI-generated abuse surges as states race to regulate

The lawsuit comes as AI-generated sexual imagery proliferates. The National Center for Missing & Exploited Children received 440,419 cyber tips related to AI-generated child sexual abuse material in the first half of 2025, compared with 6,835 in the same period of 2024 — a 63-fold increase. In Minnesota federal court, a former employee of two school districts pleaded guilty earlier this year to using AI to manipulate photos of children into abusive content.

Ellison defended the law in a statement, saying "using AI to generate nude images of people against their will is appalling." Gov. Tim Walz, who signed the bill, posted on X: "See you in court, creep."

State Rep. Jess Hanson, the House author of the bill, called the lawsuit "absolutely disgusting" and said she looked forward to Musk "trying to explain to the public exactly the redeeming qualities he thinks nudification has."

xAI is asking the court to declare the law unconstitutional and permanently block its enforcement. The company separately challenged a California law targeting AI-generated deepfake content.

This article is for informational purposes only and does not constitute investment advice.