Musk Suffers Setback in U.S. Rules Fight Over Grok, Deepfakes and Safety Claims

A U.S. federal appeals court issued a setback for Elon Musk and his company xAI, ruling against Musk’s efforts to block federal regulatory oversight in a high-profile dispute over content moderation, deepfakes and alleged safety violations tied to the Grok AI chatbot.

The 9th U.S. Circuit Court of Appeals rejected arguments from Musk and his legal team that the case should be dismissed on constitutional and jurisdictional grounds. The ruling clears the way for the Federal Trade Commission (FTC) to proceed with allegations that the company misled users about the safety and risks of its AI, particularly as concerns mount about Grok’s potential to produce deepfakes, harmful content and misinformation.

In filings, the FTC claimed that Grok had been marketed without sufficient safeguards against generating misinformation, election-related falsehoods or abusive content, despite Musk’s public assertions that the product was safe and well-controlled. FTC officials said those statements may have violated consumer protection laws.

Musk’s defense had argued that the FTC’s claims were vague and that the agency lacked authority to regulate the development and deployment of AI systems like Grok. Lawyers for the defense also raised free speech and First Amendment concerns, saying regulators were overreaching by scrutinizing the content AI generates.

However, the appeals court found that the FTC’s case could move forward, rejecting claims that the agency had acted outside its legal remit. The judges ruled that the FTC had adequately alleged that Musk’s companies engaged in potentially deceptive trade practices and that the court had proper authority to hear the case.

The decision marks a major moment in the emerging regulatory fight over generative AI, where policymakers and enforcement agencies are increasingly pushing to hold tech companies accountable for harms related to misinformation, deepfakes and automated content. Observers say the case could shape how U.S. regulators oversee AI development and enforcement of consumer protection laws.

Musk and his companies have not publicly disclosed next steps, but their legal team may consider requesting a full court review or appealing directly to the U.S. Supreme Court. Legal experts say the outcome could set precedents for how AI products are marketed, labeled and governed in the U.S. and abroad.