Elon Musk's X Corp sued California on Friday over a state law establishing new transparency rules for social media companies, requiring them to publish their policies for policing disinformation, harassment, hate speech and extremism.

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X, the social media platform once known as Twitter, said the law known as Assembly Bill 587 violates its free speech rights under the U.S. Constitution's First Amendment and California's state constitution.

In a complaint filed in federal court in Sacramento, California, X said the law's "true intent" was to pressure social media companies into eliminating content the state found objectionable.

By doing so, California is forcing companies to adopt the state's views on politically charged issues, "a form of compelled speech in and of itself," X said.

After buying Twitter for $44 billion last October, Musk, a self-described free speech absolutist, laid off many employees responsible for monitoring and regulating content, and restored some accounts that prior management had banned.

The Anti-Defamation League and the Center for Countering Digital Hate have documented increases in the volume of hate speech on X targeting Jews, Black people, gay men and trans people since Musk took over.

Musk, the world's richest person, also runs the electric car company Tesla and space exploration company SpaceX.

The office of California Attorney General Rob Bonta, which enforces state laws, said it will respond to the complaint in court.

AB 587 requires social media companies with at least $100 million of gross annual revenue to issue semiannual reports that describe their content moderation practices, and provide data on the numbers of objectionable posts and how they were addressed.

The law also requires companies to provide copies of their terms of service. Failure to comply risks civil fines of up to $15,000 per violation per day.

Gavin Newsom, California's Democratic governor, signed the law last September, saying the state would not let social media be "weaponized" to spread hate and disinformation.

Musk laid off thousands of employees after buying Twitter, and on Monday blamed critics, including the ADL for a 60 per cent decline in U.S. advertising revenue.

In a recent interview, A.J. Brown, who resigned in June as X's head of brand safety and ad quality, said policy changes adopted by Musk that limited the visibility of objectionable posts on X rather than removing them made it difficult to convince advertisers the platform was safe.

The case is X Corp v Bonta, U.S. District Court, Eastern District of California.