The agentic AI project Eliza Labs, formerly known as AI16z, has filed a lawsuit against Elon Musk's X Corp in a San Francisco federal court, escalating tensions in the AI sector. The lawsuit centers around claims that X Corp exploited Eliza Labs' innovative 'agentic' AI technology under the guise of potential collaboration, suppressed competition, and ultimately, launched a competing AI product after suspending Eliza's accounts.

Eliza Labs, a software development company founded in 2024, is known for its open-source AI platform, elizaOS, designed for creating and managing autonomous AI agents. These AI agents can independently adapt and act, differentiating them from traditional software. The company launched auto.fun in April 2025, a platform that allows users to create AI agents without coding. According to Eliza Labs, X Corp approached them last year, expressing interest in how AI agents could function on the platform. During these discussions, Eliza Labs and its founder, Shaw Walters, shared detailed plans, roadmaps, and their future vision.

However, Eliza Labs alleges that the collaborative tone shifted as X was launching Ani and a new version of Grok. X Corp then demanded Eliza Labs pay $50,000 per month for an enterprise license, totaling $600,000 annually, to continue operating. Eliza Labs declined, deeming the demand excessive and coercive. Subsequently, X Corp suspended Eliza Labs' and Shaw Walters' accounts. Eliza Labs claims that X Corp then released its own competing AI technologies.

The lawsuit alleges that X Corp misused proprietary technology and confidential information for competitive gains and abused its dominant position in social media to stifle competition, violating antitrust laws. Eliza Labs argues that their removal from the platform was a carefully orchestrated and deceitful act that harmed the company's relationships with clients and restricted its growth. The company is seeking damages and a permanent injunction against Apple and OpenAI.

Shaw Walters stated that X refused to reactivate Eliza Labs' and his accounts. He characterized the collaborative tone as shifting to "max extraction," where X demanded framework access, documentation, and implementation details in return for account reinstatement, before ultimately "ghosting" them. According to Walters, Eliza Labs had found great success by using X's free API.

X Corp has not yet commented on the matter. An OpenAI spokesperson said that the filing was consistent with Elon Musk's ongoing pattern of harassment.

This legal action adds to the growing number of lawsuits involving Elon Musk's companies. Ex Populus, a distributor of Xai blockchain games, has also sued Musk's xAI over trademark infringement. Furthermore, Musk's xAI has sued Apple and OpenAI over alleged anti-competitive conduct. Musk also has an ongoing lawsuit against OpenAI and Sam Altman, accusing them of breach of contract and fraud.

The outcome of Eliza Labs' lawsuit could have significant implications for AI startups, platform competition, and regulatory scrutiny of tech monopolies.