OpenAI’s proposed transition from a nonprofit-controlled entity to a more investor-driven structure is facing scrutiny, even as the California attorney general’s office declined to join Elon Musk’s lawsuit against the company.
The agency stated in a letter that Musk had not demonstrated how his legal action serves the public interest of the state.
OpenAI, co-founded by Musk in 2015, is pushing to shift control away from its nonprofit board to facilitate a $40 billion fundraising round. The company argues the move is necessary to attract investment and continue scaling its operations.
As part of the proposed structure, the nonprofit would retain an equity stake expected to increase in value and help support its mission.
The California attorney general’s office, which oversees nonprofits based in the state, must approve the transition. While the office has opted not to join Musk’s lawsuit, it remains engaged due to its regulatory role in nonprofit matters.
Musk, who left OpenAI before it rose to prominence, has accused CEO Sam Altman and the current leadership of abandoning the company’s original mission of developing AI for the benefit of humanity. In a lawsuit filed earlier this year, Musk argued that OpenAI’s changes compromise its nonprofit values and asked the state to intervene.
The attorney general’s office rejected the request, stating Musk had not shown sufficient public benefit and may be seeking to direct charitable assets toward personal interests.
Adding to the controversy, Musk-led investors reportedly submitted a $97 billion unsolicited offer for control of OpenAI in February. Musk’s legal team later clarified that he had no interest in acquiring the company if its nonprofit status remained intact.
In response to the attorney general, Musk’s lawyer emphasized that philanthropic leaders and former OpenAI employees also support halting the transition. OpenAI, however, maintains that restructuring is essential to secure long-term funding and ensure growth.
The legal dispute is scheduled to go to a jury trial next spring. Meanwhile, Musk has launched his own AI venture, xAI, which positions him in direct competition with OpenAI. Altman has suggested that Musk’s actions may be motivated, in part, by a desire to slow down a rival.
