According to Bloomberg, a US federal judge dismissed Elon Musk’s attempt to block OpenAI’s transition to a for-profit entity, stating that the plaintiffs “failed to meet their burden of proof for the extraordinary relief requested.” However, other aspects of Musk’s ongoing legal battle against the company can still move forward, as outlined in the court filing.
Judge dismisses Musk’s bid to halt OpenAI’s for-profit shift
OpenAI was established as a nonprofit AI research lab in 2015 and has recently begun commercializing its products, most notably the popular ChatGPT chatbot. Despite being overseen by a nonprofit organization, OpenAI has encountered significant challenges in its efforts to restructure into a for-profit organization, primarily due to Musk’s opposition.
In November 2024, Musk, along with his startup xAI and former OpenAI board member Shivon Zilis, sought a preliminary injunction against OpenAI’s for-profit initiatives. This legal action marked an escalation in the feud that began when Musk filed a lawsuit against OpenAI in March 2024, alleging breach of contract and fiduciary duty.
Following the initial lawsuit, the case was moved from state court to federal court. Musk expanded his complaint to include antitrust allegations against both Microsoft and OpenAI, claiming that OpenAI sought to restrict investors from supporting rival companies, including xAI.
In public statements on X, Musk characterized OpenAI’s for-profit transition as a “total scam” and referred to the organization as “evil.” In response, OpenAI alleged in December 2024 that Musk had previously proposed creating a for-profit structure in 2017.
OpenAI announced plans to establish a public benefit corporation to oversee its commercial operations, removing some restrictions associated with its nonprofit status by 2025. The company’s board commented on the transition, stating, “The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission.”
In a recent development, a Musk-led investor group offered $97.4 billion to acquire control of the nonprofit that oversees OpenAI. Musk’s attorney, Marc Toberoff, emphasized that it is “time for OpenAI to return to the open-source, safety-focused force for good it once was.” However, OpenAI CEO Sam Altman dismissed the offer as an attempt by Musk to “slow down a competitor.”
Following the court’s dismissal of Musk’s injunction, he indicated that he would withdraw his efforts if OpenAI halts its transition into a profit-driven organization. Judge Yvonne Gonzalez Rogers of the Northern District of California dismissed Musk’s claims that OpenAI had violated antitrust laws and breached commitments to early donors, including Musk.
Gonzalez Rogers ruled that Musk’s arguments failed to provide sufficient proof. Nevertheless, she expedited a trial to the autumn of 2025 to address Musk’s assertion that OpenAI’s conversion is unlawful, stating that this is necessary due to “the public interest at stake and potential for harm if a conversion contrary to law occurred.”
Musk’s legal actions against OpenAI are part of a broader rivalry in the AI sector that involves Musk’s efforts to establish dominance through his own company, xAI, which was founded in 2023. Musk has accused Altman of betrayal and deceit, while Altman has suggested that Musk is not a “happy person.”
According to Altman, when questioned about claims of anti-competitive behavior, he stated that he did not instruct investors that supporting OpenAI meant they could not pursue investments in competitors. Instead, he explained that specific investors allowed access to OpenAI’s confidential information understood they would lose that access if they made active investments in rival companies.
Musk’s allegations also include accusations that Altman and co-founder Greg Brockman exploited his initial philanthropic interests to secure funding for the company, while Gonzalez Rogers rejected claims that they breached any contracts by pursuing a for-profit structure.
Neither OpenAI nor Musk’s legal team responded to requests for comment regarding the ruling.
Featured image credit: Kerem Gülen/Imagen 3
