X Faces Federal Lawsuit From Eliza Labs Over Account Suspension, Licensing Dispute

Eliza Labs, the AI software company behind the open-source elizaOS protocol, has filed a lawsuit against Elon Musk’s X Corp.

The case, brought in federal court in San Francisco, accuses X of using its market position to extract technical knowledge from the startup, launch similar products, and then suspend Eliza Labs’ account from the platform.

The lawsuit and key claims

According to the filing, Eliza Labs and founder Shaw Walters claim that X “wielded its incredible monopoly power” to remove them from the platform in an effort to stifle competition in the growing market for AI agents.

The company alleges that both Walters’ personal account and Eliza Labs’ account were suspended without warning or justification.

The complaint highlights what it describes as pressure tactics from X in the weeks before the suspension. Walters claims that X pushed Eliza toward adopting an Enterprise License or Enterprise API plan, priced at $50,000 per month (or $600,000 annually).

Eliza declined to pay, which the lawsuit argues was followed by an orchestrated effort to remove the company while allegedly using insights from its work to help build competing AI tools on X.

Eliza’s lawyers described the situation as a “fraudulent and anticompetitive effort” designed to gain both money and technical intelligence.

At the center of the dispute is elizaOS, an open-source AI protocol valued at around $2.5 billion, which has become notable for enabling autonomous AI agents. Earlier this year, Eliza Labs launched a no-code platform allowing users to build such agents without programming knowledge.

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