After Tweeting Wednesday, "Yes, Jesse and I are dating," the LA Ink star, 28, took down the message, though it was quickly spread and re-Tweeted by more than 100 people.
Her rep has said she and the motorcycle mogul, 41, are just friends and their cozy night out in Vegas over the weekend wasn't the start of a new relationship.
But a source tells PEOPLE their friendship could possibly turn into something more.
"Jesse and Kat drove to Las Vegas together in Jesse's car. It was just the two of them and they slept in the same room," says the source. "They have been friends for years, but this is the first time they are both single."
Another source adds that, "Jesse's friends are happy that he is dating again. It's a good thing that he has moved on from Sandra, because it seemed a bit delusional of Jesse to think that Sandra would take him back after he caused tons of hurtful drama."
For her part, James's ex Sandra Bullock tells PEOPLE in its current issue that the two have "moved on with our lives and only want the best for each other."
Similarly, James's rep tells Access Hollywood the motorcycle mogul moving on and "only wishes Sandra the best in everything she does."