Elon Musk’s legal team has escalated its challenge against the governance structure of OpenAI, the artificial intelligence company behind ChatGPT. During testimony on Thursday, David Schizer, a tax and nonprofit law specialist who served as the dean of Columbia Law School from 2004 to 2014, argued that the organization has acted in ways that contradict established nonprofit customs. According to reporting from The Information, Schizer testified that the OpenAI Foundation should possess "a lot more" than $200 billion, pointing to a perceived financial discrepancy stemming from the company's structural evolution. The testimony anchors Musk's broader legal thesis that the AI developer abandoned its original philanthropic mandate in pursuit of commercialization.

The structural tension of capped-profit models

The core of the dispute rests on OpenAI’s transition from a traditional nonprofit, established in 2015, to a capped-profit hybrid model introduced in 2019 to attract venture capital. Musk, who co-founded the organization before departing in 2018, alleges that this shift fundamentally breached the founding agreement to develop artificial general intelligence for the public benefit. Schizer’s testimony attempts to quantify the alleged deviation, suggesting that the nonprofit entity has been structurally shortchanged by the massive valuation accrued by its commercial arm.

While the exact calculation behind the $200 billion figure remains unverified in the initial reports, the argument highlights a structural vulnerability for hybrid organizations operating at the frontier of technology. By asserting that the nonprofit foundation was deprived of its rightful financial scale, Musk’s legal strategy targets the governance mechanisms that allowed OpenAI to partner with major corporate backers while nominally remaining under the control of a nonprofit board.

The ongoing litigation continues to test the legal viability of capped-profit structures in the technology sector. As the lawsuit progresses, the court's interpretation of OpenAI's fiduciary duties could set a precedent for how future artificial intelligence ventures balance capital-intensive research requirements with public-interest charters.

With reporting from The Information.

Source · The Information