SpaceX-owned xAI has sued Minnesota Attorney General Keith Ellison in federal court to block a state law due to take effect on Saturday that would penalise platforms hosting AI-generated non-consensual nude images, arguing the legislation violates free speech protections.

The lawsuit was filed on Monday in a federal court in Minnesota and challenges legislation that would fine companies up to $500,000 each time a user creates an explicit AI-generated image of a real person without consent.

The law, passed in April, targets so-called "nudify" applications and websites that generate sexualised images using photographs of real people. In its complaint, xAI argued the statute "imposes an overbroad, content-based ban on free speech and the tools of visual expression in a clumsy attempt to prohibit 'nudification'."

The company said the potential financial penalties were disproportionate, arguing that a platform whose users generated 100,000 prohibited images could face "an eye-popping $50 billion dollars" in fines. The lawsuit states that xAI does not dispute the objective of preventing abuse but contends the legislation extends beyond that goal and infringes First Amendment protections.

CNBC reported that the legislation was spearheaded by Minnesota state senator Erin Maye Quade after learning of a case in which a man allegedly created sexualised images and videos of more than 80 women he knew using photographs from social media. Maye Quade previously compared the proposal to longstanding laws prohibiting people from secretly taking explicit photographs through windows.

According to The Independent and PCMag, Minnesota officials have signalled they will defend the law. Attorney General Keith Ellison wrote on X: "There are plenty of worthy debates to have about AI. This is not one of them. AI nudification robs the target of their dignity and could cause them immense harm on many levels." Governor Tim Walz responded separately to news of the lawsuit, writing: "See you in court, creep."

The legal challenge comes as xAI faces broader scrutiny over image generation tools. CNBC reported that the company is defending a proposed class action lawsuit alleging its Grok chatbot and image generator were used to create child sexual abuse material and non-consensual sexualised images based on real photographs.

xAI has said it "strictly prohibits" users from generating nude or sexualised images of people without their consent and has taken legal action against users accused of circumventing its safeguards.

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