xAI, the artificial intelligence company, filed a lawsuit on July 27, 2026, to stop a Minnesota law that bans apps and websites designed to create fake nude images of people. The law, called HF 1606, was approved by Governor Tim Walz in 2025 and is scheduled to take effect on August 1, 2026. The lawsuit was filed in a federal court in Minnesota and runs 39 pages. Engadget

These apps are sometimes called "nudify" tools. They use artificial intelligence to digitally remove clothing from photos of real people, without that person's permission. Minnesota's law would fine developers $500,000 each time someone uses their product to create one of these fake images of an adult. Politico Pro called the law a "novel" approach to the problem. Politico Pro

xAI says the law goes too far. The company argues that HF 1606 is an "overbroad, content-based ban on free speech" and that it would discourage people from creating things they have a right to create. xAI wants the court to declare the law unconstitutional and to block the state from enforcing it. Engadget

Minnesota Attorney General Keith Ellison, who is named as the defendant in the lawsuit, wrote on X: "AI nudification robs the target of their dignity." Governor Walz posted a blunter message: "See you in court, creep." Engadget

Minnesota is not alone in passing laws about AI-generated fake images. As of April 1, 2026, 31 U.S. states had enacted laws related to AI deepfakes, which are realistic-looking fake videos or photos created by artificial intelligence. Ballotpedia The Minnesota case will test whether banning these tools outright conflicts with the First Amendment, which protects free speech, including some forms of expression that involve AI.

The core legal tension is this: the same AI technology that can be used to create harmful fake nude images can also be used for legitimate creative or artistic purposes. xAI argues that the law bans the tool itself rather than punishing the specific harmful act. It is a bit like banning cameras because someone might use one to take photos through a window, instead of punishing the peeping. The $500,000 fine per image makes the stakes even higher, and xAI will likely argue that this large penalty discourages developers from building tools that have both legitimate and harmful uses.

The outcome matters well beyond Minnesota. If the court strikes down the law on free speech grounds, other states writing similar rules will likely need to narrow them, targeting specific harmful uses instead of banning the tools outright. If the law is upheld, other states may copy Minnesota's approach, which could mean heavy legal and financial burdens for AI companies whose products can be misused this way.

The timing is tight. The law takes effect August 1, just days after the lawsuit was filed. xAI will likely ask the court for a temporary order to pause enforcement while the case plays out, though no such request has been publicly reported yet.

The political temperature around this case is running high. Governor Walz's personal, sharp response to xAI signals this will not be a quiet legal proceeding. Attorney General Ellison's description of nudification as a theft of dignity frames the state's defense in moral terms, not just legal ones, which could shape how the public views the case even if the court focuses narrowly on constitutional questions.

With 31 states now legislating in this area, the Minnesota case may be the first to test a full ban on nudify tools in federal court. Whatever the court decides will help define how far states can go in regulating AI-generated fake media before running into free speech limits.