OpenAI (19459041) announced on Monday a proposed restructuring which would give its nonprofit branch ongoing control over ChatGPT and all of the startup’s AI-based products. This is a reversal from an earlier announcement which called for the nonprofit to give up its authority to a newly formed public-benefit corporation.
By early next year, the Attorney General offices of California and Delaware must approve the proposed company structure. This approval is required to receive up to $30 billion from SoftBank and other investors. This money is vital for OpenAI to continue to be a leader in generative AI, and to give higher returns to its investors. Previously, the returns were limited to 100 times your original investment.
OpenAI, a nonprofit research laboratory founded in 2015 with the goal of “benefiting all humanity,” quickly became unsustainable due to the funding requirements associated with building advanced AI. Elon Musk, a cofounder of the lab, was among those who reacted strongly to the push to change this structure. Musk sued OpenAI in 2024 for breach of contract. He claimed that the company had abandoned its original mission to pursue profit.
A US federal judge rejected Musk’s initial bid to stop OpenAI’s plans to cede control in March. But last week, She allowed Musk’s claims go to trial. Former OpenAI staffer Todor Markov, Who filed an amicus Brief in Musk’s lawsuit? Openai’s
post said that it was “unfortunate” that OpenAI changed its plan “after the Attorneys General got involved and public pressure,” but called the decision “a win for the public.” Microsoft, the largestbacker, has the right to veto restructuring plans. The Wall Street Journalreports that according to The Wall Street Journal, The tech giant is busy building its own AI division in order to compete with OpenAI. This could help diversify risk associated with an investment in a startup. OpenAI’s blog stated that it is looking forward to “advancing the details” with the attorneys generals and Microsoft. Microsoft declined to comment. SoftBank did not respond immediately to a comment request.
By 2024, OpenAI published a blog about the need to update its corporate structure. The announcement came a little over a year after Altman had been abruptly dismissed by the nonprofit board of the company (he was reinstated when employees revolted). After the blog was published, many advocacy groups wrote to attorneys general to express their opposition, arguing that these plans could turn charitable funds into corporate money. Now, it appears that those efforts have paid off. Bret Taylor, OpenAI board chair, wrote that the decision to retain OpenAI by the nonprofit was made after engaging in constructive dialogue and hearing from civic leaders. Blog post by the company.
Although the blog post on Monday didn’t provide any details, the newly proposed structure will keep nonprofits in control. The company stated that its current for profit subsidiary will become a Public Benefit Corporation (PBC), similar to how its competitors Anthropic, and xAI, are set up. PBCs can legally prioritize both shareholder and social interests.
OpenAI’s post on its blog stated that “the nonprofit will control the PBC and be a major shareholder, giving it better resources to support a number of benefits.” “Our mission will remain the same, and so will the PBC.”
Delaware Attorney General Kathy Jennings stated in a statement that she was encouraged by OpenAI considering her concerns and allowing nonprofit to retain control. Jennings stated that “now that the company has developed a new plan I intend to review it in order to ensure that it is compliant with Delaware law and that OpenAI’s charitable purposes are met, as well as that the nonprofit entity retains control over the for profit entity.” Elissa perez, spokesperson for the California Attorney General’s Office, stated in a press release that her office also is reviewing the plan.
Robert Weissman is the co-president at Public Citizen who has been criticizing OpenAI’s business model for years. He claims that there are no new restrictions to ensure that the for-profit adheres with OpenAI’s mission to benefit all humanity through powerful AI tools. Weissman told WIRED that “this leaves us where it is, with a nonprofit purportedly regulating a for profit but exercising no visible restrictions on the for profit.”
OpenAI plans to have its new nonprofit hold shares in a public benefit corporation. OpenAI was valued at $300 billion in a recent funding round, so the shares could be very lucrative if the nonprofit sold or borrowed against them. California philanthropic activist have asked for the nonprofit to receive a “fair” value of shares. This could make it the most well-funded foundation ever created. They also want to see the nonprofit be independent of the company so that business interests don’t corrupt philanthropic donations. On Monday, activists renewed the call for Bonta’s to carefully review OpenAI plans in order to achieve this separation. OpenAI spokesperson Steve Sharpe stated that the nonprofit would have the right to appoint or remove board members of the public-benefit company. “Moving to [public-benefit corporation] removes the capped-profit structures,” he said. The PBC will have a traditional capital structure, which allows employees, investors, as well as the nonprofit to hold equity directly.
Altman wrote an email sent to employees in the company’s announcement, stating that “OpenAI is not and will never be a normal company.”
Updated 5/5/25 at 7:35 ET. This story has been updated with additional comments from OpenAI and California Attorney General’s Office.
