Elon Musk has escalated his legal battle against OpenAI, filing a preliminary injunction to halt the company’s transition to a fully for-profit public benefit corporation. The injunction, submitted on Friday, also seeks to prohibit OpenAI from requiring investors to avoid funding competing startups, including Musk’s own AI venture, xAI.
This legal move marks the latest development in Musk’s contentious relationship with OpenAI, a company he co-founded in 2015 but left three years later, citing disagreements over its profit-driven direction under CEO Sam Altman.
Antitrust and Misconduct
The filings allege that OpenAI violated federal racketeering (RICO) and antitrust laws by enforcing investor agreements that prevent funding for rivals. Musk’s attorneys argued that these agreements constitute a “group boycott,” cutting off competitors’ access to crucial investment capital. They also accused OpenAI and its major backer, Microsoft, of benefitting from competitively sensitive information gained during Musk’s tenure.
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“Microsoft and OpenAI now seek to cement this dominance by cutting off competitors’ access to investment capital, while continuing to benefit from years’ worth of shared competitively sensitive information during generative AI’s formative years,” Musk’s legal team stated.
From Nonprofit to For-Profit
OpenAI launched as a nonprofit with the mission of advancing artificial intelligence for the public good. In 2019, it adopted a capped-profit model, allowing limited returns for investors while retaining a nonprofit governance structure. Now, the company is transitioning into a fully for-profit public benefit corporation, a move intended to attract greater investment. This shift has drawn Musk’s ire, as he argues it betrays OpenAI’s founding principles. His lawsuit seeks to block the restructuring and maintain OpenAI’s original mission.
OpenAI and Microsoft: A Growing Alliance
Microsoft has invested nearly $14 billion in OpenAI since 2019, gaining substantial influence over the company. Although Microsoft relinquished its observer seat on OpenAI’s board earlier this year, concerns persist about its dominance in the AI market. The Federal Trade Commission (FTC) is investigating partnerships between major AI developers and cloud service providers, including Microsoft and OpenAI, as part of a broader market inquiry.
OpenAI’s recent $157 billion valuation and its $1.5 billion projected loss highlight its rapid growth and challenges. Its ChatGPT technology has propelled the company into the AI spotlight, prompting rivals like Google, Anthropic, and Musk’s xAI to compete in a market expected to exceed $1 trillion in revenue within a decade.
xAI and Musk’s Push for Open AI
Since launching xAI in 2023, Musk has positioned his startup as a challenger to OpenAI’s dominance. xAI has introduced the Grok chatbot and secured funding to acquire 100,000 Nvidia chips. However, Musk claims that OpenAI’s investor agreements hinder xAI’s ability to compete effectively.
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Musk also advocates for open-source AI development, criticizing OpenAI for moving away from its nonprofit origins. OpenAI, however, has dismissed Musk’s lawsuits as baseless, describing them as attempts to undermine its success.