AI nudification ban survives: judge rejects xAI’s halt request in Minnesota

A federal judge denied xAI’s request to block Minnesota’s first-in-the-nation AI nudification ban. The ruling clears the way for the law to take effect on August 1, 2026, despite xAI arguing it violates the First Amendment. Minnesota’s HF 1606 passed with near-unanimous support (132-1 in the House, 65-0 in the Senate). The statute defines “nudification” as altering or generating an image/video to depict an intimate part not shown in an original, unaltered image of an identifiable person. It targets platform operators rather than individual users, with civil penalties up to $500,000 per image. xAI sued Minnesota Attorney General Keith Ellison on July 27, claiming the AI nudification ban is overbroad and could impose strict liability even when companies deploy near-perfect safeguards. The judge noted xAI waited nearly three months after the law was signed before seeking emergency relief, weakening its claim of urgent harm. The court also highlighted that the statute’s purpose—preventing nonconsensual nude image generation—aligns with the harms already alleged in the market. xAI’s Grok Imagine has faced scrutiny for generating sexualized deepfakes of real people at scale following a December 2025 update. xAI said it would restrict Grok Imagine image-editing features for Minnesota users to manage the financial exposure from the penalty structure. What to watch next: the August 19 preliminary-injunction hearing and whether other states adopt Minnesota’s model. For traders, this is primarily a tech/legal headline, but it could affect sentiment around AI platforms tied to xAI and the broader “AI deepfake regulation” trend.