Elon Musk wants OpenAI to pause its activities. He is asking a federal court to block this AI giant from transitioning to a fully for-profit mode.
Elon's lawyers, along with AI company xAI and former OpenAI board member Shivon Zilis, filed for a preliminary injunction on Friday. The complaint accuses OpenAI of foul play, alleging it pressured investors to avoid supporting competitors like xAI. Elon stated this is not only unfair but also illegal.
He first sued the company in March 2024 in San Francisco state court. That lawsuit was dismissed and later refiled in federal court. Now, Elon's legal team, led by Marc Toberoff from Los Angeles, is heating up. They claim OpenAI's actions violate the federal racketeering law (RICO) and antitrust regulations.
The alleged investor blockade of OpenAI
Elon's lawsuit focuses on claiming that OpenAI and Microsoft, the company's backer, created a 'boycott group' to block funding for competitors. The complaint alleges that OpenAI required its investors to sign agreements preventing them from supporting competitors, including xAI.
Elon's lawyers call this a violation of antitrust laws, accusing OpenAI of cutting off essential funding sources for emerging AI startups. 'Microsoft and OpenAI are now looking to solidify this dominance by cutting off competitors' access to investment capital,' Elon's team argues.
The filings also claim OpenAI is benefiting from sensitive information shared in its early years, giving the company an unfair advantage while stifling competition. A spokesperson for OpenAI dismissed Elon's efforts, calling these complaints 'recycled complaints' without merit.
The bigger picture
OpenAI has not always been the tech giant it is today. The company was founded in 2015 as a non-profit organization, promising to advance AI for the benefit of humanity. That mission took a turn in 2019 when OpenAI adopted a capped-profit model.
Under this structure, the non-profit branch of the company oversees a profit-making subsidiary, allowing OpenAI to attract investment while still maintaining some ties to its original mission. Currently, OpenAI is going even further, transforming into a fully for-profit public benefit corporation.
According to Elon's legal team, this aims to increase attractiveness to investors while consolidating the company's power. Reports indicate OpenAI's valuation reached $157 billion in October, with Thrive Capital leading a major funding round also involving Microsoft and Nvidia.
Microsoft, which has invested nearly $14 billion in OpenAI, has played a crucial role in the rise of the company. However, this tech giant revealed a $1.5 billion loss in its first financial quarter, largely related to its partnership with OpenAI.
Although it relinquished its observer status on OpenAI's board in July, the Federal Trade Commission (FTC) is still closely monitoring this relationship.
FTC Chair Lina Khan announced an investigation earlier this year into partnerships between AI developers and cloud service providers. Companies like OpenAI, Amazon, Alphabet, Microsoft, and Anthropic are all under close scrutiny.