DOJ Joins xAI Lawsuit Over Colorado AI Bias Law

The U.S. Department of Justice filed to intervene Friday in Elon Musk’s xAI lawsuit challenging Colorado’s AI discrimination law, SB24-205. The department argues the statute violates the Equal Protection Clause of the Fourteenth Amendment and imposes burdens on technology companies.

Colorado passed SB24-205 in 2024. The law applies to so-called high-risk AI systems used in decisions affecting hiring, student admissions and mortgage lending. It requires companies that build or use those systems to assess and reduce discrimination risks, disclose how the systems operate and notify consumers when AI influences consequential decisions. The law is scheduled to take effect on June 30 after a delay.

xAI sued Colorado earlier this month, contending the law forces its systems to produce ideologically biased or inaccurate results. In its court filing, the Justice Department said the statute requires companies to guard against unintentional “disparate impact” tied to protected characteristics such as race and sex while exempting certain uses intended to advance diversity or address historic discrimination.

Assistant Attorney General Harmeet K. Dhillon wrote in a department statement that laws compelling companies to embed particular diversity, equity and inclusion policies into products are unlawful and that the Justice Department will not stand aside as states impose such requirements. The filing aligns federal enforcement with xAI’s constitutional challenge and brings federal resources into the litigation.

Legal advisers in Colorado noted the DOJ argues the law could slow AI development and impose costly compliance obligations on startups and other companies. Cody Barela, a partner at Armstrong Teasdale, described the burden argument as potentially persuasive and suggested courts might view claims about effects on competitiveness as a separate line of inquiry.

The filing comes amid efforts by some states to regulate automated decision systems and ongoing federal debate over whether AI policy should be set nationally. Colorado was among the first states to pass a broad law addressing algorithmic bias; other states have advanced or proposed measures targeting risks from generative AI and automated decision tools.

The department did not provide a litigation timeline or list upcoming court deadlines in its announcement. The case will proceed through the federal courts, where judges will consider the constitutional and regulatory questions raised by the law and the DOJ’s intervention.