The EUs Final Warning to Elon Musks X

Since January 8, 2026, European Union regulators have been focusing on Grok AI. A 90-day ultimatum has been given to X to fix the illegal content issue or it will have to face penalties of up to 6% of global revenue. This action marks a turning point in how the EU regulates and enforces compliance of US Internet companies that operate within its 450 million-user market.

On Blue Ticks and the €120 Million Penalty

The introduction of paid verification altered the trust model for X. EU regulators characterized this model as "misleading" in that users interpret blue checks as representing authenticity (in all cases) rather than simply paying for a subscription. This encouraged an increase in scams (where bad actors impersonate brands) that ultimately harm brand equity and consumer trust.

Henna Virkkunen, Vice-President of the Commission stated, "there is no place in the EU for misleading users, hiding paid advertisements, and obstructing researchers from verifying data". X is required to implement changes to their paid subscription service and to implement transparency.

Grok AI

Now we're in an era of AI image generation. And, Grok AI's recently generated images have attracted more attention. Users used the Grok Image generation tool to generate illegal content such as child pornography and violent depictions, despite X having safeguards in place. The EU has required X to take remedial action including improving their models, implementing prompt filters and to geo-block certain countries.

90-Day Window

Show improvements by April 2026 or be penalized. X only allowed Premium+ subscribers to generate content from Jan 9. Critics: Late reaction, not preventative. The DSA requires risk assessments be done BEFORE than banning the content.

Thomas Régnier (spokesman)

10. has to decide what happens next. National regulators are considering banning all products with fines being the most likely punishment.

Elon’s Response to DSA is Defiance as well as Embracing Open Source

78118. Retweeting Rubio’s Statement called it, “An Attack on American Technology.” JD Vance said, “They’re being punished because they didn’t censor.” X released its algorithm as Open Source on January 19.

Internally, X audits filters and deactivates bad users. Researchers are duplicating the hacks and it erodes trust in the system.

What Does the DSA Address: Billions of dollars of fines

The Digital Safety Agency (DSA) mandates that the biggest platforms will need to adhere to even more new obligations around Systemic Risk by 2024, which means that because X has over 100 million users within the European Union (EU), X will also have to comply.

Non compliance to the regulations will lead to a fine starting from €120 million i.e. approximately 1% of the total revenue generated by the company. If the delay continues, fines accrue based on how long it takes for the company to come into compliance. For intentional violations the fines could be up to 6% of Worldwide Gross Turnover (approximately $1.2 billion for X). In addition to fines, it has caused service disruptions.

Malaysia/Indonesia blockage. Ofcom and California AG investigation.

X will suffer major financial damage. Before Musk took over, 30% of the revenue generated through Ads on “X”. However, his actions led to decrease in the amount of advertising income that have impacted that number, and now accumulate by way of penalties.

What X Can Do:

1. Become compliant by adding more AI Guards and Verifying Accounts. That will be a huge engineering expense

2. Fight back through lobbying Democrats in the U.S. and taking action against fines. This will delay enforcement of fines.

3. Change direction by removing features for Europe and/or limiting access to their platform. This will decrease revenue.

Regulations Around the World

• The EU has sent a clear message with its 2023 fine of TikTok for mishandling children's data (GDPR). The EU means business when it comes to enforcement of the General Data Protection Regulation (GDPR), as evidenced by the fine of TikTok of $370 million.

• Meta also continues to face scrutiny by regulators regarding its targeted advertising and political content. Penalties could rise into the multi-billions as a result of the EU's Digital Services Act (DSA).

• The UK has passed the Online Safety Act, which closely mirrors the DSA, requiring companies to perform risk assessments and put safety measures in place for children.

• Ofcom has now started to trace the companies that are unable to comply with the laws, beginning with fines issued this year.

• Malaysia and Indonesia have tested the method of blocking companies on “X” for the dissemination of illegal materials. However, after these reforms, companies were allowed back onto the platform. The "X" method has shown other countries what the future may look like for law enforcement, and therefore, the regulatory landscape.

• Currently, the company behind the social media platform, "X," uses a patchwork approach with its "geo-fencing" and filtering technologies. However, this type of compliance does not scale across 190 countries and leaves much room for improvement.

• Additionally, after Q4 of 2025, investors are no longer optimistic about the company's future; there has been approximately a 15% year-on-year decline in revenue due to the company's inability to retain advertisers.

• Companies are now left with a very small margin for profit as fines continue to accumulate, and therefore require proof of safety before returning as advertisers. Furthermore, advertisers currently have over $2 billion of paused spend waiting for companies to provide verifiable moderation.

Looking Ahead

The European Commission is expected to assess the adjustments made by X to Grok AI in April. The case will close if they determine that the added capacity complies with the requirements provided by the DSA, otherwise X may incur repetitive fines and face potential service restrictions and/or suspension in all 27 member states of the European Union.

X also aims to retrain its primary model, to implement watermarks in AI-generated content, to create better reporting lines, and to promote itself positively toward regulators and users through open-sourcing of its main algorithm.

The EU has clearly communicated that there are responsibilities for all platforms without an exception for US corporations. X, along with other US-based platforms, continues to push the boundaries of compliance, putting itself on a direct collision course with the EU's enforcement capabilities.

Now the EU defines its new normal, especially for the executives. The E.U.'s final warning to Elon Musk and "X" provides a clear indication of the E.U.'s enforcement authority under the DSA, and should remind executives to ensure operational compliance with this new approach as soon as possible now that Musk has begun fighting, while the markets watch.