California lawmakers and advocacy groups are pushing back against OpenAI's plan to become a for-profit company. The company is considering drastic options, including leaving the state, as legal and political challenges threaten a $19 billion funding deal.
OpenAI is running into political resistance as it tries to shift into a for-profit company. According to a Wall Street Journal report, company leaders have discussed leaving California if the state creates regulatory obstacles to the restructuring. An OpenAI spokesperson said there are no concrete plans to move.
Founded in 2015 as a nonprofit, OpenAI later set up a for-profit arm to secure billions in investment from companies like Microsoft. Now, the company is preparing a major overhaul that would put a new for-profit entity at the center. This new structure is a requirement for a $19 billion funding deal.
Political pushback in California
Political opposition in California is growing. A group of major foundations, nonprofits, and labor unions is trying to block the restructuring. OpenAI is already taking legal action against some of these organizations. The coalition wants California's Attorney General to make sure the new setup doesn't break state charity laws. At the same time, authorities in Delaware are also reviewing the situation. Both attorneys general could file lawsuits or set conditions for the restructuring.
Investors are demanding equity in the new for-profit company. If the restructuring fails, they could pull out, which would hit OpenAI's plans for new data centers and further AI development.
In May, OpenAI made a key concession: the nonprofit will keep control over the new company. Internally, the Journal reports this was viewed as a setback for CEO Sam Altman and his investors, but seen as necessary to calm the growing opposition.
