Subpoena Standoff Ends: SpaceX (SPCX.US) Forced to Appear in Court Over AI Safety, Regulatory Cracks Emerge Amid Space Capital Frenzy

Title context: Subpoena Standoff Ends: SpaceX (SPCX.US) Forced to Appear in Court Over AI Safety, Regulatory Cracks Emerge Amid Space Capital Frenzy Text: After a subpoena standoff lasting several weeks, Musk's SpaceX (SPCX.US) has finally agreed to appear this Friday at a hearing of the New York City Council's Committee on Technology to face questioning over AI safety risks. This belated testimony has thrust SpaceX's AI division into the global regulatory spotlight and exposed the position of this space giant, valued at over $2 trillion, between a capital frenzy and compliance pressure. From "the only absentee" to being forced into court In mid-September, New York City Council Speaker Julie Menin sent voluntary testimony invitations to five of the world's largest AI companies. Anthropic, OpenAI, Alphabet Inc. Class C, and Meta confirmed their attendance one after another, but SpaceX's AI division alone did not respond. On September 28, Menin formally issued a subpoena to SpaceX, the first time she had used the City Council's subpoena power. The October 5 hearing lasted nearly ten hours. Representatives of the four major AI companies testified under oath and faced intense questioning from council members, but SpaceX did not appear. Menin said on the spot that the company was in a state of "direct violation of the subpoena." The City Council subsequently informed SpaceX that it planned to ask the state Supreme Court to enforce the subpoena. Two days later, SpaceX proactively requested a meeting and ultimately agreed to attend this Friday's hearing. This hearing is not a formality. The City Council is reviewing 10 AI regulatory legislative proposals, whose core provisions include: all AI systems sold or deployed in New York City must be equipped with a human-operable "kill switch," with a fine of $25,000 per violation; mandatory third-party verification; and the first AI whistleblower bounty system in the United Stateswhistleblowers can receive a share of the fines. The City Council is also reviewing a proposal to create a private right of action for individuals harmed by AI. The deeper backdrop to this investigation is the long-standing stagnation of AI legislation at the U.S. federal level. Congress has held numerous AI hearings over the years, yet has never managed to pass substantive AI safety legislation. Menin's judgment on this is unequivocal: "Given what is at stake, these companies have an obligation to come before the Council and answer questions under oath." New York City is not the only actor, but its legislative ambitions are clearly greater. Unlike the EU AI Act, which focuses on risk classification, New York City's proposals place more emphasis on enforcement mechanismsthe kill switch addresses "what to do when something goes wrong," third-party verification addresses "who checks before launch," and whistleblower bounties address "who exposes internal problems that regulators cannot see." Together, these three form a closed loop from prevention to detection to accountability. The intersection of a capital feast and compliance reefs SpaceX is currently caught in a fierce tug-of-war between its capital narrative and regulatory pressure. On the same day the hearing news emerged, Space Capital released a report predicting that, driven by SpaceX's record-breaking IPO, defense spending, and demand for space infrastructure, global investment in the space economy could surpass the $100 billion annual threshold for the first time in 2026. This forecast comes from the latest analysis of third-quarter spending by investment firm Space Capital. In addition to quantifying the scale of investment, the report also noted that the number of space companies reaching "unicorn" valuations is hitting a record high. "We all thought 2021 was a crazy hot market," said Space Capital CEO Chad Anderson, referring to the SPAC deal frenzy at the time. "But compared with what is happening now, that was just a flash in the pan." SpaceX listed on Nasdaq on June 12 at an issue price of $135, raising about $75 billion. Its market value surpassed $2 trillion on its first day of trading and later climbed further to about $2.2 trillion. But the other side of the capital influx is accumulating risk. Anderson also warned that the business models of some space companies are built on uncertain variables, such as excessive reliance on SpaceX's Starship launch capability, "which is a major risk." This logic applies equally to SpaceX itselfthe regulatory risk of its AI division is becoming an insufficiently priced variable in its valuation. SpaceX has clearly disclosed in its prospectus that xAI faces "substantial regulatory risk," involving the EU AI Act, California's frontier AI bill, and related legislation in New York State. The regulatory storm triggered by Grok in early 2026 was even more direct: the UK communications regulator and the European Commission launched formal investigations one after another, and the UK privacy regulator subsequently opened an independent investigation. Attorneys general from 35 states jointly signed a letter demanding that xAI take action to prevent Grok from generating child sexual abuse material. At the federal level, some Pentagon agencies have already used Grok models on a limited basis, extending the regulatory controversy from "consumer protection" to "national security procurement." What to watch at Friday's hearing Friday's hearing will be the first time SpaceX publicly answers questions on AI safety under oath. Lawmakers are expected to press on three core questions: How does the company assess catastrophic AI risks? What mechanism can stop the company from continuing to release models when a safety review has not been passed? If an AI system causes serious harm, who bears responsibility? Last week's hearing already provided a reference pointrepresentatives of the four major AI companies all failed to give quantitative answers on catastrophic risk, and generally avoided committing to whether a model would be automatically shelved if it failed a safety review. Whether SpaceX's response will be different is worth watching.