April 9 (Reuters) - xAI filed a lawsuit on Thursday seeking to block Colorado from enforcing a new law regulating artificial intelligence systems, escalating a fight over whether oversight should be handled by states or by Washington.
The lawsuit, filed in U.S. District Court in Colorado, challenges Senate Bill 24-205, which is scheduled to take effect on June 30. The law imposes disclosure and risk-mitigation requirements on developers of so‑called "high‑risk" AI systems used in decisions involving employment, housing, education, health care and financial services.
Elon Musk's artificial intelligence firm said the law violates the First Amendment by restricting how developers design AI systems and compelling speech on contentious public issues.
The company says the law would force it to alter its flagship AI model, Grok, to reflect the state's views on diversity and discrimination rather than being objective.
"Government regulation that is applied at the state level in a patchwork across the country can have the effect to hamper innovation and deter competition in an open market," xAI said.
xAI, which recently merged with SpaceX, is seeking a court declaration that the law is unconstitutional and an injunction blocking its enforcement.
The lawsuit also cites White House executive orders criticizing state-by-state AI regulation and federal warnings that patchwork state laws could undermine U.S. AI leadership and national security.
The Colorado Attorney General's Office declined to comment on the litigation.
While some tech companies and Republican lawmakers want states to leave AI regulation to Washington, California's attorney general has warned against relying solely on Congress, pointing to years of delays on data privacy and technology laws.
President Donald Trump's AI advisers favor federal oversight through a streamlined national framework instead of a patchwork of state-level rules.
(Reporting by Harshita Mary Varghese in Bengaluru, Juby Baby in Mexico City and Jonathan Stempel in New York; Editing by Leroy Leo)
