xAI, now operating as part of the merged SpaceXAI, has sued Minnesota Attorney General Keith Ellison to block a new state law banning "nudify" apps that generate nonconsensual sexual deepfakes. The company argues the law, due to take effect on 1 August 2026, is an unconstitutional, overbroad restriction on free speech that goes far beyond the legitimate goal of stopping nonconsensual deepfakes, and says it would be forced to restrict Grok Imagine's image-editing features if the law stands. The case matters because it is the first legal challenge to what is described as the first law of its kind in the US, and its outcome could shape how states regulate AI image-generation tools more broadly.

The law, signed by Governor Tim Walz, would fine app developers $500,000 each time a user generates a nonconsensual adult deepfake using their product. xAI has faced scrutiny since earlier in the year over reports that its Grok tool allowed users to create sexualised images of real women and children, prompting investigations by regulators including Ofcom, the European Commission, Ireland's Data Protection Commission and California authorities; the company says it has since introduced blockers and even sued a South Carolina user for misusing Grok in this way. Ellison and Walz have both responded defiantly on social media, with Ellison calling AI nudification an affront to dignity and Walz simply writing "See you in court, creep."