Elon Musk Takes Legal Action to Prevent OpenAI from Becoming a For-Profit Organization

Elon Musk wants OpenAI to temporarily suspend operations. He is asking the federal court to prevent this AI giant from transitioning to a fully profit-driven mode. On Friday, Elon's lawyers, along with AI company xAI and former OpenAI board member Shivon Zilis, filed a preliminary injunction. The lawsuit accuses OpenAI of playing dirty, allegedly pressuring investors to avoid supporting competitors like xAI. Elon said this was not only unfair but also illegal. He first sued the company in March 2024 in a San Francisco state court. The lawsuit was dismissed and then refiled in federal court. Now, Elon's legal team, led by Marc Toberoff from Los Angeles, is ramping up. They argue that OpenAI's actions violate the Racketeer Influenced and Corrupt Organizations Act (RICO) and antitrust regulations. The alleged investor lockdown of OpenAI The crux of Elon's lawsuit is the claim that OpenAI and Microsoft, the company's backers, created a 'boycott group' to block funding for competitive rivals. According to the complaint, OpenAI asked its investors to sign agreements preventing them from supporting competitors, including xAI. Elon's lawyers call this a violation of antitrust laws, accusing OpenAI of cutting off essential funding for emerging AI startups. "Microsoft and OpenAI are now seeking to reinforce this dominance by cutting off access to investment capital from competing rivals," Elon's team argued. The profile also claims that OpenAI has benefited from sensitive information shared in the early years, giving the company an unfair advantage while preventing competition. An OpenAI spokesperson has dismissed Elon's efforts, calling these complaints "baseless recycling complaints." Bigger picture OpenAI is not always the tech giant it is today. The company was founded in 2015 as a non-profit organization, promising to advance AI for the benefit of humanity. That mission took a turn in 2019 when OpenAI adopted a for-profit model. Under this structure, the profit branch of the company oversees a subsidiary for profit, allowing OpenAI to attract investment while still maintaining some connection to its original mission. Currently, OpenAI is going even further, transitioning into a completely for-profit public welfare company. According to Elon's legal team, this is aimed at increasing attractiveness to investors while strengthening the company's power. Reports indicate that OpenAI's valuation reached $157 billion in October, with Thrive Capital leading a large funding round that also included Microsoft and Nvidia. Microsoft, the company that invested nearly $14 billion in OpenAI, has played a crucial role in the rise of this company. However, this technology giant has revealed a loss of $1.5 billion in its first financial quarter, largely related to its partnership with OpenAI. Despite resigning as an observer on the board of OpenAI in July, the Federal Trade Commission (FTC) continues to closely monitor this relationship. FTC Chairman Lina Khan announced an investigation earlier this year into the partnership between AI developers and cloud service providers. Companies such as OpenAI, Amazon, Alphabet, Microsoft, and Anthropic are all under close scrutiny.