U.K. Investigation Into X Over Allegedly Illegal Deepfakes Risks Igniting a Free Speech Battle With the U.S.

The U.K. communications regulator Ofcom has launched an investigation into Elon Musk's X platform to determine if its Grok AI chatbot is violating U.K. laws by producing non-consensual, sexually explicit deepfakes according to reports. The regulator said it will assess whether X has failed in its duty to protect users from content that may be illegal as reported.

Ofcom cited reports that Grok has been used to generate undressed images of people and sexualized images of children that could amount to child sexual abuse material according to investigations. The regulator stated it will act swiftly and has the power to fine X up to 10% of its global revenue if it finds the platform in violation of the law as stated.

Prime Minister Keir Starmer described the AI-generated content as 'disgraceful,' 'disgusting,' and 'unlawful' in an interview with a U.K. radio station according to CBS News. He emphasized the need for X to 'get a grip' on the issue and stated that 'all options are on the table,' including a potential ban as reported.

The U.K. investigation is part of a broader international backlash against Grok. X has faced condemnation and regulatory scrutiny in countries including France, India, Malaysia, Indonesia, and Italy according to Reuters. These governments have raised concerns over the AI chatbot's ability to create non-consensual, sexually explicit content as noted.

What Are the Legal and Regulatory Implications?

U.K. law prohibits the creation and sharing of non-consensual intimate images and child sexual abuse material as reported. Ofcom has the authority to fine X up to 10% of its global revenue if the investigation finds it has violated the Online Safety Act according to Reuters.

The regulator may also request that payment providers or advertisers withdraw their services from X or ask internet service providers to block access to the platform in the U.K. as stated.

Technology Secretary Liz Kendall has publicly backed Ofcom's swift action, while some political leaders like Nigel Farage have raised concerns about free speech implications and potential overreach according to Politico.

How Are Global Markets and Regulators Responding?

X has taken steps to address the issue by restricting Grok's image generation and editing features to paying subscribers as reported. The move was criticized by Downing Street as 'insulting' and accused of creating a 'premium service' for illegal content according to Sky News.

In addition to the U.K. probe, France has referred the issue to prosecutors and regulators, while India has sent formal notices to X demanding action according to Reuters. Malaysia and Indonesia have blocked Grok entirely, citing concerns over the potential for pornographic and non-consensual content as reported.

X has stated that anyone using Grok to produce illegal content will face the same consequences as if they uploaded such content directly according to Business Insider. The company also emphasized its 'zero tolerance' policy for child sexual exploitation as stated.

What Are the Investor Concerns and Market Reactions?

X has faced ongoing financial and reputational challenges. The platform's U.K. revenues have dropped nearly 60% in a year as advertisers pulled funding over content concerns according to The Guardian.

Investors have also been wary of X's long-term viability amid ongoing legal and regulatory pressures. The platform's controversial policies and Musk's confrontational stance with regulators and advertisers have raised concerns about its ability to sustain growth as noted.

Meanwhile, the stock performance of AI-focused companies has varied. C3.ai, a competitor in the enterprise AI space, has faced its own challenges, with its founder selling $7.6 million in shares in December 2025 according to Yahoo Finance.

Despite these issues, C3.ai recently exceeded expectations in Q2 2026, with earnings of -$0.25 per share and revenue of $75.1 million as reported. The company forecasts Q3 revenue between $72 million and $80 million according to Investing.com.

Investor sentiment for X remains cautious, given the regulatory risks and ongoing content moderation challenges. The company's ability to navigate the U.K. investigation and global scrutiny will likely influence its future performance and market perception as stated.