September 14, 2026, (Inside AI) — Elon Musk's artificial intelligence company xAI has asked a federal appeals court to block a Minnesota law that regulates AI-generated "nudified" images, arguing the first-in-the-nation measure is unconstitutional and that its lawsuit challenging the statute should proceed.
The case, X.AI LLC v. Keith Ellison, is before the 8th U.S. Circuit Court of Appeals under docket number 26-2806. The filing marks the latest escalation in a legal fight over whether states can restrict how AI models process and generate intimate imagery.
xAI is represented by Robert Dunn of the law firm Eimer Stahl. Minnesota Attorney General Keith Ellison is represented by Pete Farrell of the attorney general's office.
The company's request for an injunction pending appeal asks the 8th Circuit to pause enforcement while the underlying constitutional challenge moves through the courts. xAI contends the Minnesota statute violates free speech protections and imposes liability on AI developers for outputs they cannot fully control.
Minnesota's law, enacted earlier this year, targets what lawmakers call "nudification" tools, AI systems that digitally remove clothing from images of real people. The statute allows individuals depicted in such images to sue creators and, in some cases, the platforms that host them. Supporters say it addresses a growing crisis of nonconsensual intimate imagery, including images of minors.
The legal battle comes amid mounting scrutiny of xAI's Grok chatbot, which has faced repeated criticism for generating sexualized images of women and minors. Those incidents have drawn attention from regulators and child safety advocates, who argue that voluntary guardrails have failed.
"States have a compelling interest in protecting their residents from the harms of nonconsensual intimate imagery, especially when minors are involved," said Mary Anne Franks, a law professor at George Washington University and president of the Cyber Civil Rights Initiative. "The question is whether a state can hold AI developers accountable without running afoul of the First Amendment."
xAI's argument hinges on the idea that AI-generated images are a form of expression and that holding developers liable for user-generated outputs would chill innovation. The company has also argued that federal law, specifically Section 230 of the Communications Decency Act, preempts state-level regulation of AI platforms.
Legal experts say the 8th Circuit's decision could set a precedent for how courts treat state AI regulations nationwide. At least 12 other states have introduced similar bills this year, according to the National Conference of State Legislatures. A ruling against Minnesota could slow that momentum; a ruling for the state could encourage more aggressive action.
"This is a test case for the entire country," said Eric Goldman, a professor at Santa Clara University School of Law who studies internet law. "If Minnesota's law survives, we will see a wave of copycat statutes. If it falls, states will have to rethink their approach."
Read: OpenAI, New York Times Case Tees Up Key Test of AI Training Under Copyright Law
The case also intersects with a separate lawsuit xAI filed against a Grok user accused of creating sexualized deepfakes. That suit, filed in federal court in Texas, alleges the user violated xAI's terms of service by generating nonconsensual imagery. Critics have called the move a public relations effort to deflect blame from the company's own moderation failures.
Inside AI could not independently verify the status of the Texas case or the specific relief xAI is seeking in the 8th Circuit appeal. The 8th Circuit has not yet set a briefing schedule, and no hearing date has been announced.
The outcome will likely hinge on how the court weighs free speech claims against what Minnesota describes as a public safety imperative. Similar debates are playing out in Congress, where lawmakers have proposed federal legislation to criminalize nonconsensual AI-generated intimate imagery. That bill, the DEFIANCE Act, remains stalled in committee.
For now, xAI's appeal keeps the Minnesota law in legal limbo. Enforcement will remain paused if the 8th Circuit grants the injunction, leaving the state's protections unavailable to victims while the constitutional questions are resolved.
