The actual license issue is pretty specific. Kimi K2.5 ships under a modified MIT that has one extra clause: if you exceed 100M MAU or $20M/month in revenue, you must prominently display "Kimi K2.5" in your UI. Cursor almost certainly clears that revenue threshold. So this isn't a "you can't use it" situation - it's "you can use it, you just have to say so." The fact that they didn't is the interesting part. They could have been fully compliant and just... put a line in their model picker. That they chose not to tells you everything about how they want Composer 2 to be perceived.
The actual license issue is pretty specific. Kimi K2.5 ships under a modified MIT that has one extra clause: if you exceed 100M MAU or $20M/month in revenue, you must prominently display "Kimi K2.5" in your UI. Cursor almost certainly clears that revenue threshold. So this isn't a "you can't use it" situation - it's "you can use it, you just have to say so." The fact that they didn't is the interesting part. They could have been fully compliant and just... put a line in their model picker. That they chose not to tells you everything about how they want Composer 2 to be perceived.
And Kimi is a distilled US frontier model. C’est la vie.