Agentic AI project Eliza Labs has filed a lawsuit against Elon Musk’s xAI, claiming that the AI company engaged in monopolistic practices meant to “deplatform” agentic AI launchpads.
The lawsuit claims that xAI attempted to “extract” valuable information, including technical documentation and usage figures related to the development of Eliza Labs’ platform, to copy its ideas before “banishing” Eliza Labs from xAI.
Eliza Labs co-founder Shaw Walters argues in the lawsuit that the relationship between the two companies started off amicably, with xAI inviting Walters to share ideas. He also said that they built on xAI’s application programming interface (API) because it was free. Walters added:
“The collaborative tone turned transactional, just as X was launching Ani and a new version of Grok. Suddenly, they were demanding we pay $50,000 a month for an enterprise license — $600,000 a year — or face legal action.
We were already paying them over $20,000 annually through various licenses and fees,” Walters continued. Cointelegraph reached out to Walters, but he declined to provide any further comment.
The lawsuit highlights the litigious nature of the artificial intelligence sector, as legal action continues to pile up surrounding monopolistic practices, intellectual property rights, and legal liabilities of AI service providers.
Related: Eliza Labs launches auto.fun, a no-code AI spin on Pump.Fun
Lawsuits mount in the nascent AI sector
The AI industry is still in its infancy, with key regulatory and legal questions left unanswered about the nascent technology.
These regulatory grey zones exist alongside the legal issues traditionally faced by tech companies, such as trademark and patent infringement, making the AI sector a battleground ripe for litigation.
In February 2024, Elon Musk filed a lawsuit against Sam Altman, the founder of OpenAI, and OpenAI itself, over the company’s proposal to become a for-profit enterprise.
Musk argued that the company abandoned its original mission as a non-profit, open-source project that would create tools for the public good.
The lawsuit was withdrawn several months later, in June, but was withdrawn without prejudice, meaning that Musk can continue to reintroduce the lawsuit until it is dismissed or withdrawn with prejudice.
In July 2024, The New York Times sued OpenAI over the use of copyrighted material in the company’s large-language model (LLM), ChatGPT, demanding that detailed source material be provided for AI-generated content.
Xai, an Ethereum-focused gaming company, sued Elon Musk’s xAI over trademark infringement in August 2025, alleging that the similarity of the trademarks has confused consumers and damaged its business.
Magazine: Everybody hates GPT-5, AI shows social media can’t be fixed: AI Eye
