Musk Still Has a Chance to Halt OpenAI's Profit-Driven Shift

Elon Musk lost a recent legal battle against OpenAI this week, but a federal judge appeared to offer some hope to Musk—and others opposing OpenAI’s shift toward profitability.

In Musk's lawsuit against OpenAI, Microsoft and OpenAI CEO Sam Altman were also named as defendants. The lawsuit accuses OpenAI of abandoning its nonprofit mission to ensure AI research benefits all of humanity. Founded in 2015 as a nonprofit, OpenAI transitioned to a "capped-profit" structure in 2019 and is now planning to restructure into a public benefit corporation.

Musk had sought a preliminary injunction to block OpenAI’s move toward profitability. On Tuesday, U.S. District Judge Yvonne Gonzalez Rogers of the Northern District of California denied Musk’s request—but expressed some legal concerns regarding OpenAI’s planned restructuring.

In her ruling rejecting the injunction, Judge Rogers stated that using public funds to support the transformation of a nonprofit into a for-profit entity could result in "substantial and irreparable harm." OpenAI’s nonprofit currently holds a majority stake in its for-profit arm and is reportedly set to receive billions in compensation during the transition.

Judge Rogers also noted that several of OpenAI’s co-founders, including Altman and President Greg Brockman, had pledged not to use OpenAI as a tool for personal enrichment. In her decision, Judge Rogers indicated that the court is prepared to offer an expedited trial in the fall of 2025 to resolve disputes over the company’s restructuring.

Mark Teverbaugh, an attorney representing Musk, told TechCrunch that Musk’s legal team was pleased with the judge’s decision and plans to accept the expedited trial offer. OpenAI has not yet confirmed whether it will do the same and did not immediately respond to requests for comment.

Judge Rogers’ comments on OpenAI’s profit-driven shift were not entirely favorable for the company.

Taylor Whitmer, an attorney representing Encode—a nonprofit that filed an amicus brief arguing that OpenAI’s shift to profitability might jeopardize AI safety—told TechCrunch that Judge Rogers’ ruling casts a "shadow of regulatory uncertainty" over OpenAI’s board. Attorneys general in California and Delaware are already investigating the transition, and the concerns raised by Judge Rogers may encourage them to pursue their inquiries more aggressively, Whitmer said.

OpenAI did secure some victories in Judge Rogers’ ruling.

Evidence presented by Musk’s legal team showing that OpenAI began transitioning to a for-profit model after receiving approximately $44 million in donations from Musk failed to meet the high standard required for a preliminary injunction, Judge Rogers found. In her ruling, the judge pointed out that some emails submitted as evidence suggested Musk himself had considered the possibility of OpenAI becoming a for-profit entity someday.

Judge Rogers also stated that xAI, Musk’s AI company and the plaintiff in the case, failed to demonstrate that it would suffer "irreparable harm" if OpenAI’s transition to profitability were not halted. She was also unpersuaded by the plaintiffs’ arguments that OpenAI’s close partner and investor, Microsoft, would violate cross-ownership laws or that Musk had standing under California’s prohibition on self-dealing.

Once a key supporter of OpenAI, Musk has now become one of the organization’s most prominent critics. xAI directly competes with OpenAI in developing cutting-edge AI models, and Musk and Altman are now vying for legal and political influence under the new presidential administration.

The stakes are high for OpenAI. Reports indicate that the company must complete its transition to profitability by 2026, or some of the funds it recently raised could convert into debt.

At least one former OpenAI employee is concerned about the potential impact on AI governance if OpenAI successfully completes its transition. To protect future job prospects, this former employee, speaking anonymously to TechCrunch, said they believe the startup’s shift could pose a threat to public safety.

Part of the motivation behind OpenAI’s nonprofit structure was to ensure that profit motives wouldn’t override its mission: ensuring AI research benefits all of humanity. However, if OpenAI becomes a traditional for-profit company, there may be little to stop it from prioritizing profits above all else, the former employee told TechCrunch.

The former employee added that OpenAI’s nonprofit framework was one of the primary reasons they joined the organization.

In just a few more months, the challenges OpenAI must overcome in its profitability transition will become clearer. Regulators, AI safety advocates, and tech investors will be watching closely.