DOJ Backs Elon Musk’s xAI in Constitutional Challenge to Colorado’s AI Regulation Law

The Department of Justice has joined Elon Musk’s artificial intelligence company xAI in a lawsuit against Colorado, challenging a state law they claim unconstitutionally forces AI developers to incorporate diversity, equity, and inclusion principles into their platforms.

Harmeet Dhillon, head of DOJ’s Civil Rights Division, announced the department’s intervention as its first constitutional challenge in an AI case. “We join @xai’s landmark suit, and stand against woke DEI standards being imposed by Colorado,” Dhillon stated.

The legal battle centers on Colorado’s consumer protection bill passed in 2024, which requires “high-risk” AI developers like xAI to exercise “reasonable care” in protecting consumers from “algorithmic discrimination.” The law, set to take effect in June, prohibits AI tools from discriminating based on protected classes such as race and religion.

xAI, founded by Musk in 2023, developed the increasingly popular AI platform Grok. The company alleges that Colorado’s legislation would compel them to alter their AI system to conform to what they describe as a “controversial, highly politicized viewpoint.”

The DOJ’s lawsuit specifically targets language in the bill that allows AI developers to favor certain classes of people when doing so would “increase diversity or redress historical discrimination.” Government lawyers argue this provision “fosters further discrimination” and “jeopardizes the United States’ position as the global AI leader by requiring AI systems to incorporate discriminatory ideology that prioritizes preferred demographic characteristics and outcomes over accurate and merit-based outputs.”

Colorado Governor Jared Polis, a Democrat, reluctantly signed the bill into law despite concerns that its burdensome regulations might drive tech innovators away from the state. The law also affects entities deploying AI platforms, such as hospitals and banks, ostensibly to ensure consumers receive fair treatment.

Legal experts have noted that Colorado will serve as a “national test case” for AI consumer protection legislation, as it’s the first state to enact such comprehensive regulations. The law firm Brownstein Hyatt Farber Schreck described it as a case study on the constitutional boundaries of state regulatory power in the emerging field of artificial intelligence.

This lawsuit adds to Colorado’s growing list of high-profile legal challenges in culture war cases. Earlier this month, the Supreme Court ruled 8-1 that Colorado’s conversion therapy ban violated the First Amendment because it selectively restricted certain types of speech. The state has also faced defeats in other landmark Supreme Court cases including 303 Creative, which addressed a website designer’s right to refuse service based on religious beliefs, and the 2018 Masterpiece Cakeshop decision.

The libertarian CATO Institute highlighted this pattern, noting that “Colorado clearly has strong views on what kinds of speech are harmful and discriminatory, as seen in its multiple losses at the Supreme Court.” CATO fellow David Inserra warned that the AI law “will inevitably result in developers restricting lawful speech from their AIs in the name of compliance.”

As the case moves forward, it represents a significant test of government authority to regulate artificial intelligence development, balancing consumer protection concerns against constitutional freedoms. The outcome could set important precedents for how states approach AI regulation nationwide as the technology continues to rapidly evolve and integrate into various sectors of society.

The Colorado Attorney General’s office has not yet issued a formal response to the DOJ’s intervention in the case.