Facing lawsuits and regulatory scrutiny, OpenAI is backing off plans for a for-profit structure.
“We made the decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware,” OpenAI CEO Sam Altman said in a letter to employees.
OpenAI was founded as a nonprofit in 2015, and in 2019, it restructured by establishing a “capped-profit” arm, which can (somewhat) limit the returns on profits for employees and investors, such as Microsoft. In return, OpenAI could attract more investment and pay leading data scientists bigger salaries.
The nonprofit side to OpenAI has continued to govern the company. But in December, the San Francisco lab announced its transition to an “enduring company” by becoming a Public Benefit Corporation that would run OpenAI’s operations and businesses. Meanwhile, the nonprofit side would merely “hire a leadership team and staff to pursue charitable initiatives in sectors such as health care, education, and science.”
OpenAI justified the change by explaining it would help it raise even more capital from investors to fund AI research, including the development of artificial general intelligence (AGI), or AI that equals or surpasses human intelligence.
But the move also faced criticism and a lawsuit from OpenAI co-founder Elon Musk, who alleged the company was abandoning its mission to ensure that AI development benefits all, rather than merely corporations. Last month, former employees for OpenAI and several top AI scientists also signed an open letter urging the attorneys general for California and Delaware to intervene and stop the company from becoming a for-profit structure.
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“AGI is the most important and potentially dangerous technology of our time,” said George Hinton, a scientist dubbed the “AI godfather,” who signed the letter. “OpenAI was right that this technology merits strong structures and incentives to ensure it is developed safely, and is wrong now in attempting to change these structures and incentives.”
So it looks like the resistance forced OpenAI to relent. Nevertheless, the company says it’s still transitioning its capped-profit commercial arm into a Public Benefit Corporation, which is obligated to weigh both the business and societal benefit of its decisions. “The nonprofit will control and also be a large shareholder of the PBC, giving the nonprofit better resources to support many benefits,” Altman said today.
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“Instead of our current complex capped-profit structure—which made sense when it looked like there might be one dominant AGI effort but doesn’t in a world of many great AGI companies—we are moving to a normal capital structure where everyone has stock,” he added. “This is not a sale, but a change of structure to something simpler.”
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The company plans on sharing more details about its new structuring plans with the attorneys general, Microsoft, and its newly announced nonprofit commissioners.
Disclosure: Ziff Davis, PCMag’s parent company, filed a lawsuit against OpenAI in April 2025, alleging it infringed Ziff Davis copyrights in training and operating its AI systems.
About Michael Kan
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