Musk Might Still have An Opportunity to Challenge OpenAI’s Shift to a For-Profit Model
Elon Musk faced a setback in his lawsuit against OpenAI this week, but a federal judge’s remarks suggest there’s still room for optimism for those opposing OpenAI’s shift to a for-profit model.
Musk’s lawsuit, which also targets Microsoft and OpenAI CEO Sam Altman, alleges that OpenAI abandoned its original nonprofit mission to develop AI for the benefit of all humanity. Initially founded as a nonprofit in 2015, OpenAI transitioned to a “capped-profit” model in 2019 and is now planning to restructure again as a public benefit corporation.
Musk had requested a preliminary injunction to block OpenAI’s for-profit transition, but on Tuesday, U.S. District Court Judge Yvonne Gonzalez Rogers denied the request. However, she raised legal concerns about the conversion, noting that using public funds to support a nonprofit’s transformation into a for-profit entity could cause “significant and irreparable harm.”
OpenAI’s Founding Commitments and Expedited Trial
The judge also highlighted that several OpenAI co-founders, including Altman and President Greg Brockman, originally pledged not to use the organization for personal financial gain. To address these concerns, she offered an expedited trial in the fall of 2025 to resolve the corporate restructuring dispute.
Marc Toberoff, Musk’s attorney, stated that they were satisfied with the ruling and plan to move forward with the expedited trial. OpenAI has not yet responded to the offer or provided a comment on the ruling.
While the decision isn’t a clear victory for Musk, the judge’s concerns over OpenAI’s restructuring signal potential challenges ahead for the company.
Tyler Whitmer, an attorney representing Encode—a nonprofit that filed an amicus brief warning that OpenAI’s for-profit transition could undermine AI safety—told TechCrunch that Judge Rogers’ decision casts a “cloud” of regulatory uncertainty over OpenAI’s board. With attorneys general in California and Delaware already investigating the matter, Whitmer suggested that the judge’s concerns might encourage even deeper scrutiny.
Despite this, Judge Rogers’ ruling included some favorable points for OpenAI.
Judge Rejects Musk’s Contract Breach Claim Against OpenAI
Musk’s legal team argued that OpenAI breached a contract by accepting roughly $44 million in donations from him before shifting toward a for-profit model. However, Judge Rogers found the evidence insufficient to justify a preliminary injunction, noting that some emails submitted in the case showed Musk himself had considered OpenAI’s potential transition to a for-profit entity.
The judge also ruled that xAI, Musk’s AI company and a plaintiff in the lawsuit, failed to prove it would suffer “irreparable harm” if OpenAI’s restructuring proceeded. Additionally, she dismissed claims that OpenAI’s relationship with Microsoft violated interlocking directorate laws and found Musk lacked standing under California’s self-dealing statutes.
Once a key supporter of OpenAI, Musk has now emerged as one of its most vocal critics. His company, xAI, competes directly with OpenAI in developing advanced AI models, and both he and OpenAI CEO Sam Altman are now maneuvering for legal and political influence under the new presidential administration.
OpenAI faces significant pressure to complete its for-profit transition by 2026—otherwise, some of the capital it recently raised could convert into debt.
Meanwhile, concerns about the transition extend beyond the courtroom. A former OpenAI employee, speaking anonymously to TechCrunch for fear of professional repercussions, warned that the company’s restructuring could jeopardize AI governance and public safety. They noted that OpenAI’s nonprofit status was intended to prevent profit-driven motives from overriding its mission to develop AI for the benefit of humanity. If OpenAI becomes a fully for-profit entity, they cautioned, there may be little stopping it from prioritizing financial gain above all else—something they considered when deciding to join the organization in the first place.
In the coming months, the regulatory and legal landscape will become clearer, revealing how many obstacles OpenAI must navigate to complete its transformation. AI safety advocates, investors, and policymakers will be watching closely.
Read the original article on: TechCrunch
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