California AG Urged to Halt OpenAI’s Profit Plans by Coalition

A coalition of diverse organizations, including nonprofit entities such as LatinoProsperity and labor groups like the California Teamsters, is urging California Attorney General Rob Bonta to intervene and prevent OpenAI from transitioning into a for-profit corporation, as reported by The Los Angeles Times. OpenAI has announced its intentions to evolve into a public-benefit corporation by 2024, with a crucial two-year timeframe to accomplish this transition or face significant financial repercussions, where a large portion of the funds it has raised could convert into debt.

The coalition’s primary concerns center around the assertion that OpenAI has “failed to protect its charitable assets” and is actively “subverting its charitable mission to advance safe artificial intelligence.” Initially founded as a nonprofit research organization focused on studying artificial intelligence, OpenAI made the strategic shift to a for-profit model, while still being overseen by a nonprofit, in 2019.

This operational structure is legally permissible in California; however, the petitioners argue that OpenAI’s motivation for pursuing a new organizational model stems not from a commitment to its mission but from a desire to funnel “AI’s benefits — the potential for substantial profits and control over what may evolve into transformative technologies — to a select group of corporate investors and top-tier employees.”

Engadget has reached out to Attorney General Bonta for his perspective on the petition and will provide updates should a response be received.

OpenAI has communicated its intentions clearly, stating, “Our Board has been very clear⁠ that we intend to strengthen the nonprofit so that it can deliver on its mission for the long term. We’re not selling it; we’re doubling down on its work,” in response to inquiries from Engadget. The organization also expressed eagerness to engage with leaders from community-based organizations to gather insights on how to better support their missions, as recently highlighted by the formation of an advisory commission.

OpenAI’s principal rationale for the shift to a for-profit model is to secure increased funding. At present, there are no barriers preventing OpenAI from attracting additional investments; however, as Engadget reported earlier this year, the organization faces limitations on the returns it can promise to investors. Transitioning to a for-profit structure would eliminate these restrictions, allowing OpenAI the flexibility to disregard the demands of a nonprofit board that prioritizes the potential risks associated with its technological advancements over their commercial viability.

Over the years, OpenAI’s board has sought to rein in its for-profit aspirations, exemplified by the ousting of Sam Altman in 2023, who was later reinstated, alongside the addition of board members more aligned with OpenAI’s profit-driven objectives. The organizations backing the petition contend that such actions provide sufficient grounds for the Attorney General to intervene in order to safeguard public interests.

This petition is part of a broader array of efforts aimed at halting OpenAI’s conversion to a for-profit model, including a letter from Meta to Bonta asserting that OpenAI’s shift would “flout the law,” as well as Elon Musk‘s attempt to acquire the company.

Update 8:24 PM ET: Added comment from OpenAI.