A U.S. appeals court has temporarily blocked Minnesota’s first-in-the-nation law targeting AI-generated fake nude images, allowing Elon Musk’s xAI to continue challenging the legislation in court.

The 8th U.S. Circuit Court of Appeals issued an injunction on October 2, putting the Minnesota law on hold while xAI pursues its lawsuit. The company argues that the law violates constitutional protections.

The Minnesota legislation was designed to restrict the creation of AI-generated sexually explicit images of people without their consent. Minnesota Attorney General Keith Ellison’s office said it was disappointed with the ruling and intends to defend the law as the case continues.

The case could become an important test of how U.S. courts handle AI-generated images, deepfakes, online platforms and state regulation of artificial intelligence. The ruling comes as lawmakers and technology companies continue to debate how existing laws should apply to rapidly developing generative AI tools.