Colorado Pauses Enforcement of AI Law, xAI Lawsuit Put on Hold

Colorado officials and xAI jointly asked a federal court on Friday to pause litigation and halt enforcement of SB24-205 while state lawmakers consider a draft repeal-and-replace bill.

The joint filing asked the court to cancel a June 16 scheduling conference and to suspend all case deadlines in xAI’s challenge to the law, which targets algorithmic discrimination in certain high-risk AI systems. The agreement also temporarily halts enforcement of SB24-205 and of any replacement law enacted during the current legislative session while lawmakers and regulators finalize revisions and the court considers xAI’s planned injunction request.

SB24-205 requires impact assessments and safeguards for high-risk AI systems used in areas such as hiring, housing and lending. The statute was designed to address algorithmic bias and to impose reporting and mitigation steps for systems that pose a substantial risk to civil rights.

xAI sued Colorado earlier this month seeking to block the law before it takes effect. In its complaint the company argued that SB24-205 would force developers to change how models generate responses and would impose Colorado’s views into AI outputs. The filing states the law violates the First Amendment by compelling the company’s chatbot, Grok, to produce answers that align with Colorado’s definitions of diversity and fairness. The complaint also asserts the statute is too vague to enforce, reaches beyond state borders, and treats different AI systems inconsistently.

Under terms in the joint filing, Colorado Attorney General Phil Weiser’s office will pause enforcement actions and will not issue implementing rules until the legislative session and the formal rulemaking process are complete. The attorney general agreed not to open enforcement actions or investigations against xAI for alleged violations until 14 days after the court rules on xAI’s expected injunction motion. xAI agreed to file that preliminary injunction within 28 days after final adoption of any rules implementing SB24-205 or any replacement statute.

A Colorado AI policy group convened by Gov. Jared Polis released a March 17 draft that would repeal and replace SB24-205. The joint filing cites deliberations over that draft as the reason for the pause. If legislative revisions do not resolve xAI’s constitutional concerns, the case could resume in federal court.

The dispute drew further federal attention last week when the U.S. Department of Justice moved to intervene in support of xAI. The lawsuit forms part of a wider national debate over who should set rules for artificial intelligence, as several states have advanced their own regulations while the federal government has pursued a national approach.

The court has not yet ruled on xAI’s expected motion for a preliminary injunction. For now, the joint filing preserves the status quo while Colorado’s legislature considers repeal-and-replace language and state rulemaking proceeds. If the legislature adopts changes that xAI finds insufficient, the company would retain a short window to seek emergency relief once implementing rules are finalized.