Nonprofit Group Supports Elon Musk in Opposing OpenAI’s Shift to For-Profit Model

Encode, the nonprofit organization that co-sponsored California’s ill-fated SB 1047 AI safety legislation, has requested permission to file an amicus brief in support of Elon Musk’s injunction to halt OpenAI’s transition to a for-profit company.

In a proposed brief submitted to the U.S. District Court for the Northern District of California, Encode’s counsel stated that OpenAI’s conversion to a for-profit would “undermine” the firm’s mission to “develop and deploy transformative technology in a way that is safe and beneficial to the public.”

“OpenAI and its CEO, Sam Altman, claim to be developing society-transforming technology, and those claims should be taken seriously,” the brief read. “If the world truly is at the cusp of a new age of artificial general intelligence (AGI), then the public has a profound interest in having that technology controlled by a public charity legally bound to prioritize safety and the public benefit rather than an organization focused on generating financial returns for a few privileged investors.”

OpenAI was founded in 2015 as a nonprofit research lab. As its experiments became increasingly capital-intensive, it created its current structure, taking on outside investments from VCs and companies, including Microsoft.

Today, OpenAI has a hybrid structure: a for-profit side controlled by a nonprofit with a “capped profit” share for investors and employees. The company plans to transition its for-profit entity into a Delaware Public Benefit Corporation (PBC), with the OpenAI mission as its public benefit interest. OpenAI’s nonprofit will remain but will cede control in exchange for shares in the PBC.

Musk, an early contributor to the original nonprofit entity, filed suit in November requesting an injunction to halt the proposed change. He accused OpenAI of abandoning its original philanthropic mission of making the fruits of its AI research available to all and depriving rivals of capital through anticompetitive means.

Encode’s counsel argued that OpenAI’s plans would “convert an organization bound by law to ensure the safety of advanced AI into one bound by law to balance its consideration of public benefit against the pecuniary interests of its stockholders.”

Encode emphasized that OpenAI’s nonprofit had previously committed to stop competing with any “value-aligned, safety-conscious project” nearing AGI but warned that a for-profit entity would have less incentive to uphold such commitments.

Encode, founded in July 2020 by high school student Sneha Revanur, describes itself as a network of volunteers focused on ensuring voices of younger generations are heard in conversations about AI’s impacts. Encode has contributed to various AI state and federal legislation, including the White House’s AI Bill of Rights and President Joe Biden’s executive order on AI.