OpenAI Faces Legal Scrutiny, Restructure Plans Threatened in California, Delaware

OpenAI is facing intense opposition and legal scrutiny as it attempts to transition from a nonprofit to a for-profit company, a move deemed critical for its survival and continued growth. Attorneys general in California and Delaware are investigating whether the restructuring violates nonprofit laws protecting charitable assets, with a coalition of nonprofits, labor groups, and philanthropies urging regulatory action. Investors have tied approximately $19 billion in funding to the success of this shift, as the current nonprofit structure limits governance and profit-sharing rights, frustrating backers. Critics, including former co-founder Elon Musk and advocacy groups, argue the conversion betrays OpenAI’s founding mission and could result in the misuse of AI technologies, while legal challenges and public campaigns have intensified. In response to regulatory hurdles and mounting backlash, OpenAI executives have considered relocating operations out of California to ensure the restructuring proceeds. The company stresses the necessity of the transition to finance costly AI research infrastructure and compete globally, despite the growing political and operational challenges it faces.