Key Points
- Elon Musk sued OpenAI, Sam Altman, and Greg Brockman for breach of contract.
- Judge found sufficient evidence, scheduling a jury trial for March.
- OpenAI shifted from a nonprofit to a capped‑profit model in 2019.
- By October 2025, OpenAI restructured as a Public Benefit Corporation.
- Musk invested about $38 million based on assurances of a nonprofit mission.
- OpenAI calls the lawsuit baseless and part of a harassment pattern.
- The case highlights governance challenges in the rapidly evolving AI sector.
Background and Allegations
Elon Musk, an early financial backer and co‑founder of OpenAI, filed a lawsuit claiming that OpenAI and its co‑founders Sam Altman and Greg Brockman breached their original contractual agreements. Musk alleges that the organization, founded as a nonprofit research lab, shifted its focus toward profit, contrary to assurances that it would remain dedicated to developing artificial intelligence that benefits humanity.
OpenAI’s Structural Changes
OpenAI was established in 2015 as a nonprofit. In 2019, the organization created a for‑profit subsidiary with a “capped‑profit” model intended to attract large funding and top talent while limiting investor returns. This model later evolved, and by October 2025, OpenAI completed a formal restructuring that turned the for‑profit branch into a Public Benefit Corporation, while the original nonprofit retained a 26% equity stake.
Musk’s Role and Dispute
Musk invested roughly $38 million in OpenAI’s early funding and contributed guidance and credibility based on the promise of a nonprofit structure. He resigned from the board in 2018 after his bid to become CEO was rejected. Musk has publicly criticized OpenAI’s transition to a for‑profit model and even made an unsolicited bid to purchase the company, which was declined.
Legal Proceedings
A U.S. district judge found evidence supporting Musk’s claim that OpenAI’s leaders made assurances about maintaining its nonprofit status. Consequently, a jury trial has been scheduled for March. OpenAI’s spokesperson described the lawsuit as “baseless” and part of a pattern of harassment by Musk.
Implications
The case underscores ongoing tensions in the AI industry regarding governance, mission alignment, and the balance between nonprofit ideals and the need for substantial capital. It also highlights the challenges faced by organizations that evolve their business models while attempting to honor early commitments to investors and founders.
Source: techcrunch.com