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Musk’s X Corp Hit With Antitrust Lawsuit From Startup Eliza Labs

By  |  August 28, 2025

Software developer Eliza Labs has filed a lawsuit against Elon Musk’s X Corp, alleging the company exploited its technology before suspending its account and rolling out competing products.

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    According to Reuters, the complaint was submitted on Wednesday in federal court in San Francisco. Eliza claims that X deceived it into sharing proprietary expertise about artificial intelligence “agents” that can operate autonomously on social media. Founded in 2024, Eliza developed an open-source system that enables the creation and management of such AI-driven agents, which differ from traditional software by adapting and acting independently.

    The lawsuit accuses X of violating antitrust law, arguing that the company used its dominant position in social media to stifle competition and inflate pricing. Per Reuters, Eliza asserts that X approached the startup last year under the pretense of discussing ways for AI agents to function on the platform. During those talks, Eliza and its founder Shaw Walters—also a plaintiff—shared detailed plans for the firm’s roadmap and future vision.

    Read more: Elon Musk Sues Apple Over iPhone Integration of OpenAI’s ChatGPT

    According to the court filing, X later demanded that Eliza pay $50,000 a month for an enterprise license to continue operating. The startup claims this was part of a broader effort to coerce developers into paying “exorbitant” sums or risk losing access to the site. Eliza says its removal from X in June damaged customer relationships and stunted growth.

    The company also preemptively challenged a possible defense based on Section 230, a U.S. law that shields tech companies from certain legal claims. Eliza argues that its suspension was not a publishing decision covered by the statute but rather a “calculated and cunning” attempt to undermine a competitor.

    As Reuters reported, representatives for both X and Eliza did not immediately respond to requests for comment. The case is titled Eliza Labs Inc et al v. X Corporation, U.S. District Court, Northern District of California, No. 3:25-cv-07243-TSH.

    Source: Reuters