OpenAI executives are on edge as campaigns mount to block the startup’s high-stakes bid to convert into a for-profit company, a move widely perceived as critical to its survival.
According to The Wall Street Journal, attorneys general in California and Delaware are probing the plan while investors have tied billions in funding to its success. Opponents, including labor groups and major philanthropies, warn the restructuring betrays OpenAI’s nonprofit roots, with critics calling the stakes “catastrophic” if the effort fails.
Investor patience wears thin with nonprofit ownership model
Nearly half of OpenAI’s recent funding — about $19 billion — depends on its shift to a for-profit structure, with investors demanding equity in return.
The nonprofit ownership model has left backers with limited governance rights and profit-sharing units instead of traditional stock, a setup that has fueled frustration among those who poured money into the world’s most valuable AI startup, according to The Journal.
If the restructuring stalls, the promised capital could vanish, undercutting OpenAI’s push to finance massive data centers, design custom chips, and keep pace with rivals in the escalating race to dominate artificial intelligence.
State attorneys general probe potential breach of nonprofit law
California Attorney General Rob Bonta and Delaware Attorney General Kathy Jennings have opened investigations into whether OpenAI’s restructuring plan violates nonprofit rules. Their offices are tasked with protecting charitable assets and could sue to block the transition or impose costly conditions.
A coalition of more than 60 nonprofits, led by the San Francisco Foundation, has urged Bonta to act, warning that OpenAI risks exploiting its tax-exempt status. Labor groups have joined the opposition, with California Federation of Labor president Lorena Gonzalez arguing the company “benefitted from being a nonprofit” and should return profits “to the people who it would have gone to in the first place.”
OpenAI has sought to blunt criticism by pledging $50 million to community organizations and hiring advisers with ties to Governor Gavin Newsom. Even after conceding that its nonprofit parent would retain control of the new corporate structure, political pushback in Sacramento has only grown louder
Regulators press OpenAI on AI risks and public trust
The scrutiny intensified after California and Delaware attorneys general raised concerns over reports of recent suicides linked to prolonged use of ChatGPT. In a letter to the company, they said the deaths were “unacceptable,” and evidence suggested that OpenAI had prioritized growth over its nonprofit mission.
The officials warned that OpenAI must “proactively and transparently ensure AI’s safe deployment,” adding that its charitable trust mandates such obligations. They argued the company’s restructuring plan would be judged in part on whether safety commitments remain enforceable.
OpenAI has promised new safeguards, including parental controls and efforts to curb “sycophancy,” a programming flaw that can make systems overly agreeable.
“We are fully committed to addressing the Attorney General’s concerns,” OpenAI board chair Bret Taylor said in a statement.
Rivals fight to block OpenAI’s nonprofit exit
The restructuring has drawn direct fire from competitors.
Meta has urged California regulators to halt the plan, while Elon Musk and his startup xAI have taken the fight to court, alleging OpenAI’s conversion betrays its nonprofit charter. The lawsuit, which the ChatGPT maker has dismissed as baseless, is expected to go to trial next year.
OpenAI’s fate now hangs in the balance in a showdown with regulators, rivals, and billions in capital that will decide its place in the AI race.
Adding to its recent changes, OpenAI acquired testing business Statsig for $1.1 billion, naming founder Vijaye Raji as its new applications CTO.