Elon Musk has urged the state attorneys general in California and Delaware to get involved in OpenAI’s corporate refashioning. A lawyer who has been representing Musk has encouraged the officials to negotiate for an auction of OpenAI’slarge nonprofit, to establish it’s fair value. This comes at a time when OpenAI is trying to formalize its nonprofit status change which Musk states will need more disclosure.
Musk Pushes for Auction of OpenAI's Nonprofit Assets Amid Restructuring
In a letter delivered on Tuesday, Toberoff, Musk’s attorney, took a different tone by asserting that the public interest in OpenAI’s charitable assets requires competitive bidding. Musk probably assumed that this approach will help set a realistic market value of the organisational assets as it transforms. The request is just a part of the broader campaign to manipulate the nonprofit structure of OpenAI.
In response to Musk’s request, OpenAI dismissed it as an effort to try and sue OpenAI through “lawfare.” The official of OpenAI noted that the company is not distracted from its work and stressed that the determination of the value of its assets will be made by independent consultants. OpenAI’s position is to preserve the reorganisation process itself rather than receiving outside interferences.
Musk’s OpenAI, started together with Sam Altman, gained popularity after the introduction of ChatGPT AI tool in 2022. Funded by Microsoft it reached $157 billion in October 2024 after roping in $6.6bn from investors. Actually, these factors have raised the stakes for the company’s ongoing restructuring drives due to its high growth rate and high valuation plans.
The conflict between Musk and OpenAI mirrors larger debate regarding the organisation’s management and its corporate development. Sorting out these changes isèle the lo questions of how the company and its assets will be managed and controlled becomes a hot button issue, which Musk has embraced by demanding better controls aimed at protecting the public’s interest.
Musk Sues OpenAI Over Nonprofit Conversion Amid Structural Overhaul
It was first revealed in September that OpenAI is set for a major reshuffle of its management structure to ensure it disentangles the commercial side from the nonprofit side. It laid down the plan in December when it suggested that a public benefit corporation be formed. He explained that this shift would assist OpenAI in crowdfunding more and turning into one of the most generously financed nonprofits ever, transferred to the company’s vision.
Musk, the owner of AI startup xAI, has sued OpenAI over the company’s decision to transition into a public benefit corporation. Thus, Musk claimed that this reorganisation deviates from the purpose he contributed to fund – the development of AI for the benefit of society. The decision on the temporary restraining order that Musk’s attorneys have sought is still pending and expected later this month.
Concerns have been raised regarding the bold move that OpenAI has made especially for those who argue that the company has shifted from nonprofit organization. The shift towards a public benefit corporation may help OpenAI grow more quickly, but sceptics, including Musk, claim the business focuses on profit instead of its original philanthropic mission.
Kathleen Jennings Delaware’s Attorney General has joined the case by filing an amicus on the 29th December. In legal paperwork she has submitted, Jennings stated that she is now closely scrutinizing OpenAI’s proposed modifications and the possible effects of the company reorganization. Her inclusion makes the legal fight more complicated and demonstrates that such a case is vital.
While OpenAI moves further with its legal battle, its restructuring has become a critical factor for the organization. The verdict in the lawsuit and the court’s decision to grant or reject Musk’s injunction could potentially chart the course of the company and the tension between its business and mission.
Delaware's Involvement Could Impact Musk's Effort to Block OpenAI's Transition
People close to the matter are also expecting that increased engagement of the Delaware court in deliberating on OpenAI’s reorganization plan could affect the court’s ruling on Musk’s bid to stop the transition. According to Darryll Jones, a Professor of Law at Florida A&M University, it offered the position outside Delaware may hurt Musk’s case. This has also made it clear that the state is watching the development of the event which has potential to reduce the ability of the judge who was ready to issue an injunction against the transaction.
OpenAI has been able to leverage legal threats to paint Musk’s actions of transforming the organisation into a for-profit company and a violation of fiduciary responsibility . In this way, they expect the court to buy this vision of the transaction and see that OpenAI’s change of course is a threat to the public and a betrayal of the values that Musk wanted to promote when contributing to the project.
That is why Encode’s participation in the case strengthens Musk’s claims as the nonprofit organization is aimed at promoting AI safety and developing the ethical code. The groups’ involvement raise questions about how the metamorphosis of OpenAI might affect the further advancement and application of artificial intelligence technologies most especially if monetization factors trump safety and morality factors.
Even as the attention has shifted to the case, there has been no word from the relevant authorities such as the California Attorney General Rob Bonta. His silence is reminiscent of Meta after receiving a letter from the firm asking for intervention to halt OpenAI’s conversion. The outcome of the legal proceedings may well depend on what Bonta does and does not do, given Delaware’s aggressive posture.
OpenAI’s transition has left the legal fight far from over, with several states now considering the case. While Musk, Encode and others struggle to prevent the restructuring, all will be decided in court, and thus the OpenAI’s further business development and its coverage of the relationship with non-profit organizations. As for the outcome it seems to predict how many AI organizations will be able to find a balance between the gains and the public beneficence.
