OpenAI‘s legal team is about to get even more of a workout.
A California district judge has given Elon Musk clearance to move forward with his lawsuit against OpenAI, the company he co-founded in 2015 alongside current CEO Sam Altman.
Musk’s lawsuit rests on one simple claim: That, when he invested ~$38 million (plus “strategic guidance” and the supposed credibility of his name, according to Reuters) in OpenAI, he received assurances it would continue to operate as a nonprofit.
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Yes, that’s right: In case you’ve forgotten, OpenAI was originally supposed to be a nonprofit that would investigate ways for artificial intelligence to benefit humanity. And, back then, Musk was deemed by the media to be a “fearmonger” who was wary of AI, calling it “potentially more dangerous than nukes.”
A lot has changed, obviously. Musk left OpenAI’s board in 2018; the company said it was because his electric car brand Tesla was “becom[ing] more focused on AI,” and Musk leaving OpenAI would “eliminate a potential future conflict.”
Then, in 2022, two things happened. OpenAI launched its flagship product ChatGPT, bringing us to the modern era of generative/chatbot AI, and Musk bought Twitter.
Since then, Musk has quintupled down on AI. He founded xAI, his own entrant in the space, and has used Twitter (now X) as a training ground for its ChatGPT equivalent, Grok. xAI is responsible for making the LLM tech that goes into Teslas as well as Grok, and just announced it will open a third data center. (Its first data center, btw, is facing a lawsuit over alleged violations of the US Clean Air Act.)
xAI’s most recent funding round valued it at a staggering $230 billion, but it’s not yet profitable. Its plans to eventually make money include “Macrohard,” an AI software brand whose name is an intentional dig at Microsoft.
OpenAI, meanwhile, looked at the massive gen AI bubble that spawned from ChatGPT’s introduction, and decided that actually, it would like to try making some money. It began restructuring in 2024, separating into the nonprofit arm OpenAI Foundation, and the for-profit arm OpenAI Group. The OpenAI Foundation holds a $130 billion stake in OpenAI Group.
And speaking of Microsoft, it now has a $135 billion stake in OpenAI Group, making it the company’s controlling shareholder.
Okay, with all that context, I can tell you Musk is not happy with OpenAI. His former company has become arguably the biggest player in the LLM ecosystem, and has shaped up to be a major competitor for xAI. It also reportedly wants to make its own version of X.
So, Musk is suing it.
He originally filed this claim back in 2024, but withdrew it to add fraud and antitrust claims, then re-filed it as a federal lawsuit. The ruling that came down this week from U.S. District Judge Yvonne Gonzalez Rogers cleared the way for that lawsuit to move forward.
The suit accuses Altman and fellow co-founder/OpenAI President Greg Brockman of violating promises that OpenAI would stay a nonprofit. It specifically cites Microsoft’s $13 billion investment in the company, and says Altman and Brockman have been “unjustly enriched to the tune of billions of dollars in value.”
It also says Musk was “assiduously manipulated” and “deceived” by OpenAI’s decision to establish an “opaque web of for-profit OpenAI affiliates.” It seeks an unspecified amount of monetary damages as reparations for what it calls OpenAI’s “ill-gotten gains.”
In her decision allowing this suit to go to jury trial, Judge Rogers ruled there is “plenty of evidence” that OpenAI leaders assured Musk that the company’s nonprofit mission would remain in place.
“The hearing confirms what we’ve maintained from the outset—there is substantial evidence that OpenAI’s leadership made knowingly false assurances to Mr. Musk about its charitable mission that they never honored in favor of their personal self-enrichment,” Marc Toberoff, Musk’s lead counsel, told CNBC.
OpenAI, of course, denies that Musk’s lawsuit has merit. A spokesperson told CNBC that his claims “[continue] to be baseless and a part of his ongoing pattern of harassment.”
“We remain focused on empowering the OpenAI Foundation, which is already one of the best resourced nonprofits ever,” they added.
What’s going to happen? Who knows. Back when Disney sued Midjourney, we said the whole “let them fight” thing, anticipating that Disney’s notoriously dogged copyright lawyers would be the ones to finally make a dent in the (alleged) art thievery machines. And, well, look how that turned out. For this one, we’ll wait and see.
