OpenAI Reverses Decision, Affirms Nonprofit Will Persist in Managing Business Operations

OpenAI has decided to maintain its nonprofit division’s oversight over its for-profit arm after an initial announcement regarding a shift to a for-profit model.

The organization has confirmed that OpenAI’s business section, which has been under the nonprofit umbrella since 2019, will transition to a public benefit corporation (PBC). The nonprofit will not only supervise this change but will also retain a significant stake in the PBC.

“OpenAI was founded as a nonprofit and is currently governed by that framework,” wrote OpenAI Board Chairman Bret Taylor in a blog post. “Moving forward, it will remain governed and managed by that nonprofit.”

OpenAI noted that this choice was made “after engaging with civic leaders and partaking in constructive discussions with the offices of the Attorneys General of Delaware and California.”

“We appreciate both offices and look forward to continuing these vital dialogues to ensure that OpenAI can effectively pursue its mission,” added Taylor.

Established as a nonprofit in 2015, OpenAI shifted to a “capped-profit” model in 2019 and has been attempting to restructure into a full for-profit entity once more. During the 2019 transition to a capped-profit model, OpenAI kept its nonprofit division, which currently holds a majority interest in the corporate arm.

OpenAI previously asserted that its change would bolster its nonprofit efforts and provide additional resources for “charitable initiatives” in sectors like healthcare, education, and scientific inquiry. In exchange for its majority stake, the nonprofit was expected to gain billions of dollars.

Nevertheless, there has been opposition, including from Elon Musk, who has filed a lawsuit against OpenAI to challenge the intended transition. Musk’s lawsuit claims that the organization is straying from its original nonprofit mission, which focused on ensuring AI research benefits all of humanity.

Musk sought an injunction to block OpenAI’s conversion, which a federal judge denied, although the case is scheduled to go to jury trial in spring 2026.

A group of former OpenAI employees and Encode, a nonprofit that co-sponsored California’s now-defunct SB 1047 AI safety legislation, filed amicus briefs supporting Musk’s lawsuit. Additionally, various organizations, including nonprofits and labor groups like the California Teamsters, have petitioned California Attorney General Rob Bonta to stop OpenAI’s conversion into a for-profit entity, arguing that the company has “failed to protect its charitable assets.”

Numerous Nobel laureates, law professors, and civil society organizations also sent letters to Bonta and Delaware Attorney General Kathy Jennings, urging them to halt the company’s restructuring plans.

The stakes were high for OpenAI, which needed to complete its for-profit transition by the end of this year or next to avoid losing some of its recently raised capital, as reported. The ramifications of this reversal remain uncertain.

In a letter to employees shared on OpenAI’s blog, CEO Sam Altman expressed that OpenAI may eventually require “trillions of dollars” to fulfill its goal of “[making the company’s] services broadly accessible to all of humanity.”

This story is developing. Please check back for updates.