A U.S. federal judge on Tuesday denied Elon Musk’s attempt to prevent OpenAI from transitioning into a for-profit business, dealing a setback to the billionaire’s legal efforts against the artificial intelligence startup he co-founded. U.S. District Judge Yvonne Gonzalez Rogers ruled that Musk and his AI startup, xAI, failed to justify an injunction against OpenAI as the case moves toward trial. While denying immediate relief, the judge stated she would expedite a trial later this year on Musk’s claim that OpenAI’s restructuring is unlawful.
Legal Feud Between Musk and OpenAI
Musk, who co-founded OpenAI in 2015 with Sam Altman and other entrepreneurs, sued the company in March 2024, alleging it breached its original nonprofit mission. He argued that OpenAI’s shift to a for-profit model—particularly its partnership with Microsoft—violated antitrust laws and betrayed his early support for the company.
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Court filings reveal that Musk’s lawsuit claims OpenAI’s leadership “took advantage of Musk’s altruism” to secure his initial funding of $45 million. Musk presented email exchanges as evidence that his investment was contingent on OpenAI remaining a nonprofit. However, Judge Rogers noted that whether these communications constitute a binding contract is debatable.
OpenAI’s Response and Corporate Transformation
OpenAI, which began as a nonprofit AI research lab, now operates as a hybrid structure—a nonprofit overseeing a money-making subsidiary. The company has faced resistance in its efforts to complete its for-profit restructuring, largely due to Musk’s legal challenges.
In December, OpenAI claimed that Musk himself had proposed shifting the organization to a for-profit model in 2017. The company has argued that securing billions in funding is essential to furthering its AI mission. OpenAI’s board has stated that major technology firms are investing hundreds of billions into AI development, and the nonprofit structure alone cannot sustain competitive progress.
Musk’s Attempted Buyout Rejected
Musk escalated his battle with OpenAI in February when he led an investor group that offered to buy the company for $97.4 billion. OpenAI’s board swiftly rejected the offer, with Chairman Bret Taylor stating, “OpenAI is not for sale.” In response, Musk accused the company of abandoning its founding principles and prioritizing profit over transparency.
Altman dismissed Musk’s takeover attempt as a strategy to hinder a rival company, referring to Musk’s AI startup, xAI. Following the rejection, Musk declared in court filings that he would withdraw his lawsuit if OpenAI halted its transition into a for-profit enterprise.
High-Stakes Trial Ahead
The legal battle is expected to move quickly, with Judge Rogers setting an expedited trial for the fall of 2025. The decision to fast-track proceedings is significant, given that OpenAI is currently navigating complex regulatory approvals for its restructuring in Delaware and California.
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The case unfolds against the backdrop of increasing scrutiny of AI industry investments. Microsoft’s $13 billion stake in OpenAI has drawn attention from U.S. regulators over potential antitrust concerns. Meanwhile, Japanese conglomerate SoftBank is reportedly in talks to invest tens of billions into OpenAI, potentially making it the company’s largest financial backer.