• Elon Musk's lawsuit against OpenAI will likely play out in 2025.
• Musk says OpenAI has lost sight of its mission to develop AI safety, prioritizing profits instead.
• Here's what you need to know about a battle that could impact the future of artificial intelligence.

Two of the most powerful forces in the AI industry are set to collide this year: xAI's Elon Musk and OpenAI's Sam Altman.

Musk was one of 11 cofounders, including Altman and President Greg Brockman, who established OpenAI as a nonprofit in 2015 with the mission to "advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return."

Musk left in 2018 — a year before OpenAI added a for-profit arm — citing a conflict of interest with his work at Tesla, though his lawyers say that he contributed to the company until mid-2020.

Since then, he's become a vocal skeptic of OpenAI's commitment to prioritizing transparency and safety over profit.

The feud between the founders escalated in August when Musk filed a lawsuit against Altman, OpenAI, and Microsoft, the company's biggest investor. Musk accused them of deception, prioritizing profits despite its stated mission.

That lawsuit will likely play out this year — a major battle that could impact the future of artificial intelligence. Here's what to expect.

Musk's legal challenges against OpenAI

Musk first filed a lawsuit against OpenAI in a California state court in February 2024, accusing OpenAI of violating its nonprofit mission by partnering with Microsoft. Musk withdrew that suit in June.

He filed a new lawsuit in August 2024, this time in a federal court, accusing OpenAI of a bait-and-switch deception that violates RICO laws — anti-racketeering laws first designed to target organized crime families.

Musk's lawyers say in the lawsuit that Musk "lent his name to the venture, invested significant time and millions of dollars in seed capital, and recruited top AI scientists for the company," all with the understanding that OpenAI would remain a nonprofit and prioritize developing the technology safely.

Musk's lawyers say OpenAI "betrayed" its mission when it added a for-profit arm in 2019 and deepened its partnership with Microsoft in 2023.

"Musk and the nonprofit's namesake objective were betrayed by Altman and his accomplices," the lawsuit reads. "The perfidy and deceit are of Shakespearean proportions."

In mid-November, Musk's lawyers expanded their complaint to include accusations that OpenAI and Microsoft violated antitrust laws by asking the company's investors not to back competitors in the generative AI space, like Musk's own xAI, which he launched in 2023.

In his latest move, Musk — also in November — asked a federal judge to stop OpenAI from converting into a fully for-profit corporate entity.

OpenAI has denied the claims. A representative for the company directed Business Insider to a post it published on December 13 responding to Musk's allegations.

"Now that OpenAI is the leading AI research lab and Elon runs a competing AI company, he's asking the court to stop us from effectively pursuing our mission," OpenAI wrote. "You can't sue your way to AGI. We have great respect for Elon's accomplishments and gratitude for his early contributions to OpenAI, but he should be competing in the marketplace rather than the courtroom."

Resolving the lawsuit could take months or even years. US District Judge Yvonne Gonzalez Rogers, who is overseeing the case in the San Francisco federal court, hasn't yet set a trial date.

Rogers will begin hearing arguments on January 14 on whether she should issue the preliminary injunction to prevent OpenAI from converting into a nonprofit until the rest of the case is resolved.

In weighing whether to issue the injunction, Rogers is supposed to consider the "likelihood of success" that Musk will win the case. Her decision would strongly indicate how the rest of the case might play out.

Why OpenAI's corporate structure matters

In a blog entry posted to its website on December 27, OpenAI explained why it needed to evolve its corporate structure.

The company said it wants to transition its for-profit arm into a Delaware Public Benefit Corporation⁠ — which, unlike a traditional company, prioritizes social good alongside profit — to prepare for a more capital-intensive future.

OpenAI said the structural change would enable it to "raise the necessary capital" to pursue its mission of developing artificial general intelligence and to give it more leeway to consider the interests of its backers.

The company said it would still run a nonprofit on the side focused more narrowly on charitable initiatives in healthcare, education, and science.

Rose Chan Loui, a nonprofit legal expert at UCLA, said OpenAI's current nonprofit status grants it significant control over technological development.

"What we lose in this conversion is a nonprofit with the unique ability to control AI development activities — to be a watchdog from the inside, making sure that AI is being developed safely and for the benefit of humanity. From that perspective, it seems to me that the nonprofit's current control position is priceless," she wrote to Business Insider in an email.

If the conversion to a for-profit public benefit corporation goes through, OpenAI would need to ensure that the nonprofit retains assets worth as much as what it's giving up, including a significant premium for its control. That could be in the form of cash or stock that it can sell for cash.

Still, "what seems to be envisioned is a grant-making foundation that can do good but will have a very reduced, if any, impact on the development of AI," Chan Loui said.

Former employees have also raised concerns that the nonprofit would have a reduced role in public safety.

Miles Brundage, OpenAI's former head of AGI Readiness, who left in October, responded to OpenAI's December post, saying on X that "a well-capitalized nonprofit on the side is no substitute for PBC product decisions (e.g. on pricing + safety mitigations) being aligned to the original nonprofit's mission."

He added that much of OpenAI's rationale for conversion makes sense. However, there are still "red flags," including a lack of details about its new governance structure and guardrails around the technology.

Other individuals and organizations have filed amicus briefs to the federal court where Musk filed his suit. These briefs are meant to inform the court and help it make a decision.

Kathleen Jennings, the attorney general for Delaware, where OpenAI is incorporated, filed one last week. She detailed her role in protecting the public interest if OpenAI becomes a for-profit public benefit corporation.

Chan Loui said Jennings's brief is a hopeful sign that, no matter what happens, public interest will ultimately win.

"It is encouraging that the Delaware AG has stated her commitment to protecting the public interest, including seeking an injunction if she determines that the conversion is inconsistent with OpenAI's mission and its obligations to the public, that OpenAI's board members are not fulfilling their fiduciary duties, or if the value of the conversion or the process for arriving at it is not 'entirely fair.'"

Lawyers for Musk did not immediately respond to a request for comment from Business Insider.