Elon Musk’s X Corp has been hit with an antitrust lawsuit from software startup Eliza Labs, which accuses the social media company of exploiting its market dominance to stifle competition in the fast-growing artificial intelligence sector. The complaint, filed Wednesday in federal court in San Francisco, alleges that X extracted proprietary information from Eliza under the guise of partnership discussions before suspending its account and rolling out rival AI products.
Eliza Labs, founded in 2024, specializes in open-source technology that allows developers to create and manage “AI agents” — autonomous programs capable of performing adaptive tasks on social media platforms. According to the lawsuit, X approached the company last year to discuss opportunities for integrating AI agents into its platform. During those talks, Eliza claims it shared its development roadmap, technical expertise, and long-term vision for how the technology could operate at scale.
Instead of pursuing a genuine collaboration, the lawsuit says, X later informed Eliza that it would need to pay $50,000 per month for an enterprise license to maintain access to the platform. Eliza argues the fee was an “exorbitant” attempt to coerce compliance, and when the company refused, its account was suspended in June. The startup alleges that the move not only cut off its access to potential customers but also severely disrupted its business growth.
In its legal filing, Eliza contends that X’s actions violated federal antitrust law by suppressing competition in order to protect and promote its own AI products. The startup further argues that X should not be shielded by Section 230 of the Communications Decency Act, a provision often used by tech companies to defend content moderation decisions. Eliza maintains that its suspension was not a matter of editorial judgment but rather a “calculated and cunning” strategy to eliminate a competitor.
The lawsuit, Eliza Labs Inc et al v. X Corporation (Case No. 3:25-cv-07243-TSH), names Eliza and its founder Shaw Walters as plaintiffs. The company is represented by attorneys from Hanson Bridgett, while X has not yet entered an appearance in court. If successful, the case could test the limits of how dominant platforms use their market power in the emerging AI economy, with implications for other developers seeking to operate in Musk’s expanding social media and AI ecosystem.
