Elon Musk’s X Cracks Down on InfoFi Crypto Projects; KAITO Token Falls 15%

Elon Musk’s X has taken action against projects that reward users for posting with crypto incentives. Product chief Nikita Bier said the platform will no longer allow such apps. He blamed these programs for growing reply spam and low-quality AI content.

X Revokes API Access for InfoFi Reward Apps

The crackdown directly targets InfoFi models that try to financialize attention on X.  In an X post, Bier said the platform has revoked API access for several InfoFi-linked apps. He added that the user experience should improve as bots realize posting will no longer generate income.

The market responded almost instantly to the policy change. The token associated with the Kaito AI protocol, KAITO, sank roughly 15%. According to CoinGecko data, the price reportedly dropped from about $0.70 to approximately $0.57.

KaitoAI founder Yu Hu had responded by revealing adjustments to Kaito’s rewards. In an X post, he added that the team is sunsetting Yaps and incentivized leaderboards as it moves toward Kaito Studio. Hu characterized the move as the beginning of a next phase to pursue higher-quality creator and brand activity.

Hu said Yaps was developed as a permissionless reward treatment of the system. It sought to offer users and creators opportunities for rewards based on merit and contribution. He said the building was “completely public” and intended to remain open to everyone.

He said the team introduced stricter eligibility rules and raised leaderboard thresholds to improve quality. It also used social signals and on-chain filters to reduce manipulation. However, as CoinGape reported earlier, X has rolled out Smart Cashtags, letting users tap tickers to view real-time crypto and stock prices directly inside their timeline.

Spam Concerns Push Kaito Toward a New Model

Spam issues persisted across the wider crypto posting ecosystem. Hu linked the issue to changes in X’s algorithms and the rollout of other reward projects with looser restrictions. He said those circumstances set the stage for low-quality posting to propagate even as better controls were put in place.

Crypto teams also leveraged Kaito’s program for outreach. Hu said many projects had depended on Kaito for marketing, awareness and user acquisition. It also onboarded many new users to crypto, with Korea being the biggest country of users.

The industry is well on its way to an overhaul of its reward strategy, Hu maintained. Projects have increasingly shied away from high-volume distribution and open crypto airdrops. Now, more of the projects are tending towards incentive programs that target particular behaviors rather than massive reward campaigns.

Kaito Studio will work on a marketing based tier system. Brands will collaborate with creators who match certain criteria and provide a range of scopes. Hu said the system would be based on analytics and relevance rather than open incentive loops.

The studio approach includes growth beyond X not included in the specifications. Hu mentioned YouTube, TikTok and other channels as distribution platforms in the future. Kaito, he said, hopes to expand beyond crypto as its primary vertical over time.

The transition will have no bearing on other Kaito products, Hu said. Kaito Pro, Kaito API, Kaito Launchpad and Kaito Markets will remain unaffected. KAITO will continue to exist for Kaito Studio, more details coming soon.

After the X decision, criticism quickly spread across the crypto community. On-chain sleuth ZachXBT pointed the finger at a number of teams running AI-generated spam through incentivized posting campaigns. Commentator Nic Carter cheered X’s enforcement action and called for the platform to keep flushing out remaining sources of inorganic engagement.