OpenAI halts for-profit shift to maintain nonprofit control amid Musk criticism
OpenAI abandons plan to convert to for-profit model, reaffirming its nonprofit governance after legal and public pressure from Elon Musk.
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The ChatGPT logo is seen in a photo taken in Mulhouse, eastern France, on October 19, 2023. Photo by Sebastien Bozon/AFP |
By Anna Fadiah and Hayu Andini
OpenAI, the creator of ChatGPT, has abandoned its plans to transition into a fully for-profit company, instead reaffirming its commitment to nonprofit governance. The decision comes in response to mounting criticism from co-founder Elon Musk, former employees, and AI ethicists who questioned whether the company could remain aligned with its original mission to develop artificial intelligence that benefits all of humanity.
OpenAI for-profit shift sits at the center of a broader public and legal battle about AI governance and corporate accountability. OpenAI, which recently secured funding at a valuation of $260 billion, had previously argued that a more conventional for-profit model was essential to attract the significant capital required to remain competitive in the race for artificial general intelligence. But critics feared that shifting away from nonprofit oversight would allow private interests—particularly those of major investors like Microsoft—to override ethical concerns in pursuit of profits.
OpenAI to restructure its for-profit arm as a public benefit company
Rather than converting the entire organization into a traditional for-profit entity, OpenAI announced Monday that it would restructure its existing for-profit subsidiary into a public benefit corporation (PBC). This model will enable external investors to hold equity stakes in the company while legally mandating that it continues to prioritize social good alongside profit.
In this new structure, the OpenAI nonprofit retains majority control and holds a significant stake in the for-profit arm. That means decisions made by the PBC must still align with the broader mission of the nonprofit parent, which was established to guide the ethical development of artificial intelligence technologies. Employees and investors—such as Microsoft—will now own equity in the restructured for-profit entity, but ultimate governance remains with the nonprofit board.
Musk continues legal battle, calls restructuring “cosmetic”
Elon Musk, who co-founded OpenAI in 2015 and departed in 2018, has been a vocal opponent of the company’s transition toward a profit-driven structure. Musk has filed a lawsuit in California, alleging breach of contract and fraud by CEO Sam Altman and OpenAI leadership. He claims the company diverted its original mission by seeking to commercialize its assets without proper oversight.
Marc Toberoff, Musk’s lead attorney, responded to OpenAI’s announcement by stating, “This changes nothing.” He argued the restructuring still results in charitable assets benefiting private individuals, including Altman, Microsoft, and other investors. Musk had previously called for a public auction of OpenAI’s assets and offered to purchase the company outright in a $97.4 billion bid.
Altman denies pressure shaped decision
Sam Altman, who leads OpenAI, dismissed claims that the decision to retain nonprofit control was in response to Musk’s lawsuit or outside lobbying. “We’re all obsessed with our mission,” Altman said during the announcement. “You’re all obsessed with Elon.”
According to Altman, the decision reflects OpenAI’s continued dedication to ensuring AI is developed responsibly and inclusively. He emphasized that OpenAI needs far more capital than was originally anticipated when it launched as a nonprofit research lab in 2015.
Legal scrutiny and state oversight continue
The company remains under close examination by regulatory bodies in both Delaware, where its nonprofit is incorporated, and California, where it is headquartered. Attorneys-general from both states have requested detailed assurances that the company’s conversion plan will protect its public-serving mission and ensure that nonprofit-held assets are valued and transferred appropriately.
Delaware Attorney-General Kathy Jennings said her top priority was to ensure OpenAI’s future remains centered on public benefit. “We are encouraged that the company appears to be addressing these concerns,” Jennings said Monday.
OpenAI is also working closely with independent legal advisers and Microsoft to finalize details of the new ownership structure. The company expects these negotiations to conclude later this year, allowing it to complete the conversion of its for-profit subsidiary into a PBC.
High-stakes negotiations with Microsoft and investors
One major point of negotiation remains the size of Microsoft’s stake in the new structure. Microsoft is OpenAI’s largest investor and strategic partner, having integrated OpenAI models into its suite of software products and committing billions in infrastructure and funding support.
OpenAI is reportedly still in talks with Microsoft over how much ownership it will be granted in the restructured entity. Meanwhile, past investors from recent rounds—including a $6.6 billion October funding and a $40 billion SoftBank-led round in 2025—are awaiting confirmation of their equity stakes. These investors have clauses allowing them to withdraw or reduce their commitments if the restructuring process is not completed within the year.
SoftBank, in particular, has included provisions that would allow it to cut up to $10 billion from its investment if delays persist.
ChatGPT’s success accelerated pressure for change
Much of the urgency behind OpenAI’s restructuring has stemmed from the overwhelming success of ChatGPT, launched in late 2022. The tool rapidly became one of the fastest-growing consumer technologies ever, prompting fierce competition from Google’s Gemini, Anthropic’s Claude, and Musk’s xAI.
To remain a leader in the AI arms race, OpenAI has aimed to raise tens of billions in capital, prompting internal and external pressure to provide investors with more conventional financial arrangements.
Under the previous model, investors were promised a capped return on their capital but could not hold equity in the company. The PBC model opens the door for OpenAI to compete more effectively for capital while still upholding the governance model many stakeholders believe is essential for AI safety and accountability.
Nonprofit mission survives, but tensions remain
Despite the restructuring, tensions within OpenAI and among its backers remain high. Some employees and academics continue to express concern that even under a PBC model, financial incentives could overtake the company’s founding values. Others argue that without such compromises, OpenAI would fall behind in a rapidly consolidating industry.
For now, the OpenAI for-profit shift appears to have been shelved. But the broader battle over who controls the future of artificial intelligence—and for whose benefit—continues.
By retaining nonprofit control while offering equity to investors through a public benefit corporation, OpenAI hopes to strike a balance between maintaining ethical oversight and securing the capital it needs to shape the AI landscape for years to come.