Home / News / Technology / Charles Hoskinson Calls Musk’s OpenAI Suit ‘Foundational’: A Turning Point for AGI Understanding and Non-Profit Tax Scrutiny 
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Charles Hoskinson Calls Musk’s OpenAI Suit ‘Foundational’: A Turning Point for AGI Understanding and Non-Profit Tax Scrutiny 

Published March 4, 2024 3:50 PM
James Morales
Published March 4, 2024 3:50 PM

Key Takeaways

  • Elon Musk has filed a lawsuit against OpenAI and its co-founders.
  • The complaint alleges the OpenAI founders breached an agreement they made with Musk upon the company’s formation.
  • Commenting on the case, Charles Hoskinson said it reveals how non-profits are used to evade taxes.

Last week, Elon Musk filed a lawsuit against OpenAI and 2 of its co-founders, Sam Altman and Gregory Brockman. The suit represented the culmination of years of disagreement, with Musk suing his former collaborators over their alleged departure from the open source, non-profit principles OpenAI was initially founded upon.

Weighing in on the matter, Cardano founder Charles Hoskinson implied that the lawsuit could be a landmark case not just for the AI sector, but for the wider question of what it means to be a non-profit organization.

OpenAI’s Evolving Business Model

Highlighting the central theme of Musk’s lawsuit, Hoskinson said it “reveals how not-for-profits are used to evade taxes for commercial product development.” 

As described in the complaint, Musk, who helped found OpenAI and provided $100 million of initial investment to get the project started, has accused Altman and Brockman of reneging on their contractual agreement to operate the firm as a non-profit corporation.

One crucial change in the way OpenAI operates occurred in 2018 with the incorporation of the limited liability company OpenAI Global. However, the latest lawsuit identifies the release of GPT-4 in 2023 as the moment at which the OpenAI’s founders allegedly breached their contract with Musk. 

Specifically, the complaint takes issue with OpenAI’s relationship with Microsoft, which it alleges “stands to make a fortune” selling the GPT-4 for profit.

And as Hoskinson observed, because of its non-profit status, OpenAI won’t pay any tax on the $10 billion it received from Microsoft as part of the deal.

How Microsoft Profits From OpenAI Partnership

Since forming its expansive partnership with OpenAI last year, Microsoft has moved quickly to monetize its exclusive access to GPT-4.

On top of the rumored 75% share  it is said to be extracting from OpenAI’s revenues, Microsoft has incorporated GPT-4 into many of its products and services.

The most notable example of this can be observed in Copilot, which repackages OpenAI’s powerful language model as custom AI assistants for various business and consumer applications.

Microsoft Copilot: A Lucrative AI Opportunity?

Priced at $30 a month per user, Microsoft Copilot presents a significant commercial opportunity for the tech firm, which has more paying customers than any other software developer. 

In 2023, for example, there were 67 million  Microsoft Office subscribers in the consumer market alone. Meanwhile, selling AI services to its business clients could be even more lucrative for the firm.

Modeling a scenario in which 18% of eligible users sign up for Copilot, analysts at Piper Sandler projected  the service to generate annual revenues of $10 billion by 2026. Not bad considering the combined value of Microsoft’s OpenAI investments stands at only $13 billion.

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