OpenAI’s planned move toward a more conventional for-profit structure is drawing a new legal challenge from Encode, a nonprofit group focused on AI governance and public-interest oversight.
Encode is seeking permission to file an amicus brief in support of Elon Musk’s injunction request, which aims to halt OpenAI’s transition to a for-profit company. The dispute centers on whether OpenAI can preserve its stated mission while shifting control of its operations away from its nonprofit structure.
A nonprofit joins the fight over OpenAI’s structure
Encode, the nonprofit organization that co-sponsored California’s ill-fated SB 1047 AI safety legislation, submitted a proposed brief to the U.S. District Court for the Northern District of California on Friday afternoon.
In that filing, Encode’s counsel argued that OpenAI’s conversion to a for-profit would “undermine” the company’s mission to “develop and deploy … transformative technology in a way that is safe and beneficial to the public.”
The brief frames the issue as larger than corporate governance. It argues that if OpenAI’s own claims about artificial general intelligence are taken seriously, then public oversight and nonprofit control matter because the technology could have broad consequences.
“If the world truly is at the cusp of a new age of artificial general intelligence (AGI), then the public has a profound interest in having that technology controlled by a public charity legally bound to prioritize safety and the public benefit rather than an organization focused on generating financial returns for a few privileged investors.”
Sneha Revanur, Encode’s founder and president, accused OpenAI of “internalizing the profits [of AI] but externalizing the consequences to all of humanity,” and said that “[t]he courts must intervene to ensure AI development serves the public interest.”
What OpenAI wants to change
OpenAI began in 2015 as a nonprofit research lab. As its work became more capital-intensive, it developed its current hybrid structure, taking outside investment from VCs and companies, including Microsoft.
Today, OpenAI has a for-profit side controlled by a nonprofit, with a “capped profit” share for investors and employees. In a blog post Friday morning, OpenAI said it plans to begin transitioning its existing for-profit into a Delaware Public Benefit Corporation, or PBC.
Under that plan, the PBC would have ordinary shares of stock and the OpenAI mission as its public benefit interest. OpenAI’s nonprofit would remain, but it would give up control in exchange for shares in the PBC.
Encode’s objection is that this would change the legal incentives around the company’s most important decisions. Its lawyers argue that control would move from an organization legally bound to ensure the safety of advanced AI to one required to balance public benefit against shareholder financial interests.
Why critics say safety obligations could weaken
The proposed brief focuses on the difference between mission control and investor-oriented governance. Encode argues that OpenAI’s nonprofit currently has commitments that could become harder to enforce once the restructuring is complete.
One example raised in the brief is OpenAI’s nonprofit commitment to stop competing with any “value-aligned, safety-conscious project” that comes close to building AGI before it does. Encode argues that a for-profit OpenAI would have less incentive, if any, to honor that kind of commitment.
The brief also says the nonprofit board would no longer be able to cancel investors’ equity if needed for safety after the restructuring is finished.
Encode’s filing puts the concern plainly: OpenAI’s nonprofit mission is not just a statement of values, but a governance constraint. If the nonprofit gives up control, critics argue, the mission may become less enforceable at the moment when decisions about advanced AI could become more consequential.
Who else is weighing in
Encode’s proposed brief has support from Geoffrey Hinton, a pioneer in the AI field and 2024 Nobel Laureate, and Stuart Russell, a UC Berkeley computer science professor and director at the Center for Human-Compatible AI.
Hinton said in a press release that OpenAI was created as an explicitly safety-focused nonprofit and made safety-related promises in its charter. He also argued that OpenAI benefited from nonprofit status and that letting the company abandon those commitments when inconvenient would send a bad message to others in the AI ecosystem.
Musk, an early contributor to OpenAI’s original nonprofit entity, filed suit in November seeking an injunction to stop the proposed change. He accused OpenAI of abandoning its original philanthropic mission of making the benefits of its AI research available to all, and of depriving rivals of capital, including his AI startup, xAI, through anticompetitive means.
OpenAI has called Musk’s complaints “baseless” and described them as sour grapes.
Meta, Facebook’s parent company and an AI rival, is also supporting efforts to block the conversion. In December, Meta sent a letter to California attorney general Rob Bonta, arguing that allowing the shift would have “seismic implications for Silicon Valley.”
The broader stakes for AI governance
The fight comes as OpenAI continues to lose high-level talent, partly because of concerns that it is prioritizing commercial products over safety. Miles Brundage, a longtime policy researcher who left OpenAI in October, said in posts on X that he worries OpenAI’s nonprofit could become a “side thing” that lets the PBC operate as a “normal company” without addressing potentially problematic areas.
Encode’s position is that the public interest would be harmed if a safety-focused, mission-constrained nonprofit gave up control over technology it describes as transformative. The group argues that a PBC would not provide the same enforceable commitment to safety.
The court has not simply been asked to review a technical restructuring. It is being asked to consider whether OpenAI’s original public-benefit framework should remain in control as the company pursues a structure designed for ordinary shares, outside capital and financial returns.
For Encode, the central question is whether the future of advanced AI should be directed by a public charity with legal duties to safety and public benefit, or by a company that must balance those aims with shareholder interests.