OpenAI Is in Talks with Regulators About Transitioning Into a For-Profit Organization

• OpenAI is reportedly in talks with the Attorney General of California and Delaware about going from nonprofit to for-profit.
• The non-profit division won't completely go away. It will retain a minority stake in the for-profit company.
• However, a transition like this comes with a lot of challenges. Apart from legal challenges, a lot of people might criticize this move.

After months of preparation, OpenAI has finally started talks with California and Delaware regulators about its plans to become for-profit.

Direct requests have been made to the Attorney Generals of both the states and while none of them responded to our requests comment, it's safe to say that this won't be an easy process.

It's important to note that the OpenAI non-profit is not completely going away. It will retain a minority stake in the for-profit company.

Why Does OpenAI Want to Become For-Profit?

The main reason is quite obvious - it wants to make more money. But it's not just about personal financial gains. OpenAI is now at a point where it's building large-scale AI models, things that people have never seen before.

Innovations like these require a lot of money, which a nonprofit's budget can't support. So by becoming for-profit, it can attract more investors and fund its projects.

It already established a for-profit subsidiary in 2019 to keep up with the expenses but it looks like that's not enough anymore.

Challenges In the Process

Turning a non-profit into a for-profit organization comes with many challenges. For starters, in California, a transition like this requires the value of the company's assets to be distributed among charities. But in OpenAI's case, it's not that simple because most of its assets are just intellectual property, such as large language models.

This decision might also be met with a lot of resistance, considering that the company was initially set up with a noble cause and is now digressing from its vision. For example, last year, Elon Musk, one of the company's co-founders and biggest investors, sued it for breaching the terms of the original contract.

However, three months later the lawsuit was dropped. Although Musk and his team didn't give any reason, it seemed like they knew this case was a lost cause because OpenAI had enough proof to show that no such contract term existed in the first place.

It's possible (this is just an assumption) that the actual reason why Musk sued the company was to keep it from competing against his own AI firm. If that is the case, then many top AI players won't appreciate this move and might try to jeopardize it.

An even blogger issue is what OpenAI's own employees think of this decision. So far, it doesn't look good.

Many key personnel have left the company over the past few months. This includes OpenAI's president and co-founder Greg Brockman, CTO Mira Maruti, Chief Research Officer Bob McGrew, and Vice President of Research Barret Zoph. The latest resignation came from Miles Brundage, head advisor of the AGI Readiness team.

Now, nobody directly says that they don't like the company's current approach and how it's prioritizing profit over everything else. Most of them talk about how they want to start a different venture or take some time off for a different project.

But some of them have subtly hinted that the company's goals (becoming for-profit) no longer align with their vision and what they initially signed up for.

Sure, employees come and go. But if so many top-level personnel are quitting the company, it's a matter of concern. Along with evaluating its employees' satisfaction, it also needs to think about how it'll continue to fare if the team that got it so far keeps chipping away.

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