xAI Challenges California’s Training Data Transparency Act
On December 29, 2025, xAI, the developer of the artificial intelligence (AI) chatbot Grok, filed a lawsuit seeking to invalidate California’s Generative Artificial Intelligence: Training Data Transparency Act (TDTA). The TDTA, which took effect on January 1, 2026, mandates that developers of generative AI systems or services publicly disclose certain information about the datasets used to train their models.
The law requires AI developers to post high-level summaries of the datasets used in the development of any generative AI system or service made available since January 2022. This disclosure includes 12 enumerated categories of information that must be presented on their websites.
Legal Arguments by xAI
In its complaint, xAI seeks a declaration that the TDTA violates the U.S. Constitution and a permanent injunction preventing the California attorney general from enforcing the law. Central to xAI’s argument is its claim that the law requires public disclosure of its trade secrets.
The complaint alleges that compelling such disclosure amounts to an uncompensated taking of xAI’s trade secrets, in violation of the Fifth Amendment’s Takings Clause, which prohibits the government from taking private property without just compensation.
xAI contends that the quality and uniqueness of training data are crucial to an AI model’s performance and competitive advantage. Consequently, AI developers invest heavily in identifying high-quality data sources that competitors are not using while maintaining the secrecy of such datasets.
According to the complaint, by compelling xAI to disclose how its datasets further the intended purpose of its models, the number of data points (including the number of tokens), and the types of data xAI has selected for developing its AI models, the TDTA effects an unconstitutional taking by “eviscerating xAI’s ability to exclude others from accessing that information,” thereby nullifying the value of its trade secrets.
Ambiguity and Vague Terms
xAI further argues that, to the extent that the law requires revealing the sources of its datasets “beyond the Internet writ large,” such a disclosure would also appropriate xAI’s trade secrets. These claims depend on whether the TDTA indeed requires disclosure of information that constitutes trade secrets.
xAI’s complaint acknowledges that the law does not specify how much information a “high-level” summary must disclose, and no guidance has been provided regarding the level of detail required for compliance. This ambiguity, alongside other unclear terms in the law, forms the basis of xAI’s additional argument that the law is unconstitutionally vague and violates the 14th Amendment’s Due Process Clause.
First Amendment Concerns
Separately, xAI also claims that the law violates the First Amendment by compelling speech through the required dissemination of specific information.
Implications for AI Developers
As states continue to enact laws demanding transparency regarding how AI systems are developed and trained, the absence of federal legislation leaves AI developers vulnerable to the TDTA or similar emerging laws. This scenario is likely to lead to comparable claims of trade secret misappropriation and constitutional challenges.
Courts will be tasked with navigating the tension between meaningful transparency to protect consumers and the preservation of trade secrets and other competitively sensitive information to promote innovation in the AI sector.
