Elon Musk has escalated his legal fight with OpenAI, asking a federal court to block the company’s planned conversion from a nonprofit to a for-profit entity. The request, filed Friday as a motion for preliminary injunction in US District Court for the Northern District of California, seeks to preserve the current structure while Musk’s lawsuit against OpenAI and CEO Sam Altman continues.
The filing frames the issue as both a public-interest dispute and a direct competitive concern for Musk’s own AI company, xAI. OpenAI, meanwhile, rejects the claims and says Musk’s latest filing repeats arguments it considers baseless.
What Musk wants the court to stop
Musk’s motion asks the court to halt OpenAI’s ongoing efforts to convert into a for-profit entity. It also seeks to stop any equivalent move that would reach the same result by transferring OpenAI’s intellectual property further away from the nonprofit structure.
The core argument is timing. Musk says the conversion should be paused now because, if it happens and he later wins, reversing it would be difficult. The motion argues that unwinding the change after completion would be costly, complex, and burdensome for the court, the parties, investors, and other stakeholders.
The lawsuit began in August. It challenges OpenAI’s current structure, which includes a nonprofit and several for-profit affiliates. Musk’s complaint says those affiliates allegedly “drained the non-profit of its valuable technology and personnel.”
Musk says he contributed $44 million to OpenAI from 2016 to 2020. His motion argues that the planned conversion violates the terms tied to those donations. The filing states: “There can be no serious question that OpenAI’s imminent conversion to a for-profit entity violates the terms of Musk’s donations.”
The nonprofit mission is at the center
Musk’s lawsuit says he agreed to support OpenAI based on promises that it would operate as a nonprofit devoted to open-source AI development for the benefit of humanity. In the new motion, he argues that OpenAI and Microsoft have moved the organization in the opposite direction.
The filing alleges that Microsoft and OpenAI “have transformed OpenAI into everything Altman promised Musk it would never be—a closed-source, for-profit monopoly, that rushes unsafe AI products to market for private commercial gain.”
Musk also argues that the public has a strong interest in preventing charitable assets from being diverted for private gain. His motion points to OpenAI, Inc.’s nonprofit status, its public commitments around developing AI for the benefit of humanity, and safety concerns raised by former OpenAI employees about rushing products to market in pursuit of profit.
That public-interest claim sits alongside a market-competition claim. Musk wrote that preserving competitive markets is especially important in AI because of the technology’s “profound implications for society.”
Why xAI matters in the dispute
The motion makes clear that Musk sees OpenAI’s restructuring as a threat to xAI. He alleges that OpenAI and Microsoft are “together exploiting Musk’s donations so they can build a for-profit monopoly, one now specifically targeting xAI.”
Musk also says OpenAI’s path has involved “per se anticompetitive practices, flagrant breaches of its charitable mission, and rampant self-dealing.” Those claims connect the nonprofit dispute to a broader argument about competition in the generative AI market.
A major part of that argument involves OpenAI’s October 2024 funding round. OpenAI raised $6.6 billion in that round, valuing the company at $157 billion. Investors reportedly have the right to withdraw their money if OpenAI does not complete its conversion to a for-profit within two years.
Musk alleges that OpenAI violated antitrust law during that funding round by asking investors not to invest in competitors such as xAI. He says he “has verified that at least one major investor in OpenAI’s October 2024 funding round has subsequently declined to invest in xAI.”
In Musk’s view, that matters because xAI is still in a key stage of development. His filing says “it is obviously harmful to deprive xAI of investors, particularly during this crucial and formative period of growth in the generative AI market.”
OpenAI’s response to Musk
OpenAI has denied Musk’s claims. In a statement to Ars, the company said: “Elon’s fourth attempt, which again recycles the same baseless complaints, continues to be utterly without merit.”
OpenAI also pointed to a longer statement it made in March after Musk filed an earlier version of his lawsuit. In that statement, OpenAI disputed Musk’s account of the organization’s history and said Musk supported creating a for-profit entity in 2017.
OpenAI said: “In late 2017, we and Elon decided the next step for the mission was to create a for-profit entity.” The company also said Musk wanted majority equity, initial board control, and to be CEO. According to OpenAI, Reid Hoffman covered salaries and operations after Musk withheld funding during those discussions.
OpenAI’s March statement also says the organization could not agree to Musk’s proposed terms because it believed individual absolute control over OpenAI would go against the mission. It then says Musk suggested merging OpenAI into Tesla.
OpenAI cited an early February 2018 email in which Musk allegedly suggested that OpenAI should “attach to Tesla as its cash cow,” and commented that Tesla was “the only path that could even hope to hold a candle to Google.”
The company further said Musk left OpenAI in late February 2018 and told the team he supported it finding its own way to raise billions of dollars. OpenAI also said Musk sent a December 2018 email stating: “Even raising several hundred million won’t be enough. This needs billions per year immediately or forget it.”
What the court fight could decide
The immediate question is narrow: whether the court should temporarily block OpenAI’s conversion while the lawsuit moves forward. But the stakes in the filings are broader than a temporary pause.
Musk is seeking financial damages and, among other remedies, “an order compelling specific performance of Defendants’ contractual promises to Musk.” His injunction request aims to keep OpenAI’s structure from changing before those claims are tested.
The dispute now turns on competing versions of OpenAI’s commitments, its mission, and the practical consequences of changing its corporate form. Musk says a pause is needed to protect charitable assets, competition, and xAI. OpenAI says the claims lack merit and that Musk’s own past position supported a for-profit path.
Until the court decides whether to grant preliminary relief, the fight over OpenAI’s for-profit conversion remains both a governance battle and a direct clash among major players in generative AI.