Elon Musk, OpenAI Lawsuit Fast-Tracked after Failed Bid to Block ‘Frankenstein’ For-Profit Shift

Key Takeaways

• A California judge rejected Elon Musk’s bid to halt OpenAI’s conversion to a for-profit company.
• Musk sued OpenAI for reneging on the terms of an agreement to operate the enterprise as a nonprofit.
• The case is now scheduled to go to trial in December.

After a judge denied Elon Musk’s bid to block OpenAI’s conversion into a for-profit company, the two parties have agreed to an expedited trial in December, according to a federal court filing on Friday, March 14.

Musk’s lawyers initially requested an injunction in December 2024, arguing that the conversion process should be suspended until the ongoing legal dispute is resolved.

OpenAI’s For-Profit Transition

Details of OpenAI’s proposed new structure first emerged in September 2025. Under the plan, the nonprofit board that currently oversees OpenAI’s operations will be sidelined.

The core business would then be transformed into a for-profit benefit corporation. The nonprofit board would still own a minority stake in OpenAI.

However, its role would be severely diminished as other stakeholders, including Altman himself, are granted more sway.

In documents submitted to the court on Friday, Nov. 29, Musk’s attorneys said it was inappropriate for OpenAI to complete such a conversion now, while the question of the organization’s for-profit status is the subject of ongoing litigation.

The lawsuit takes issue with OpenAI’s original move to set up a profit-making entity under the board’s control in 2019.

Elon Musk’s Issues With Microsoft

OpenAI’s partnership with Microsoft appears to have been a major contributing factor behind Musk’s decision to sue.

From his perspective, not only did OpenAI betray its original nonprofit mission, but it also did so by partnering with one of the very big tech giants whose influence over AI it was intended to counter.

Back in 2016, when Musk was still involved in the then-newly formed OpenAI, he expressed skepticism that Microsoft could bring anything positive to the table.

Meanwhile, the prospect of Google DeepMind dominating the nascent AI sector caused him “extreme mental distress,” recently disclosed emails revealed.

In the latest filing, the plaintiffs claim that OpenAI and Microsoft, “through a series of exclusive arrangements, interlocking directorates, and predatory practices,” have “seized control of nearly 70% of the market for generative artificial intelligence products.”

Accordingly, “whatever leeway OpenAI might have been due under antitrust law as a purported charity it chose to forego when it subordinated itself to Microsoft for profit,” and now must “play by the same rules as everyone else,” the document stated.

“It cannot lumber about the marketplace as a Frankenstein, stitched together from whichever corporate forms serve the pecuniary interests of Microsoft and Altman at any given moment,” the document concludes.

Antitrust Allegations

Musk’s lawyers also asked for an injunction to halt the implementation of OpenAI’s proposed new structure and called on the judge to halt OpenAI’s practice of asking investors not to back rival startups.

The arrangement, reportedly included as a provision in OpenAI’s efforts to secure fresh funding, allegedly targets companies such as Anthropic and Musk’s xAI, which is also named as a plaintiff in the ongoing lawsuit.

OpenAI’s “Fund No Competitors Edict” is a direct violation of the Sherman Antitrust Act, the latest motion stated.

According to Musk, at least one major investor in OpenAI’s October 2024 funding round subsequently declined to invest in xAI.

Any legal ruling on the matter could be crucial for Microsoft and OpenAI. The two firms have been subject to merger inquiries in the EU and U.K. and will likely be scrutinized by the Federal Trade Commission (FTC) as part of a wider Microsoft antitrust investigation.

Court Rejects Injunction Request

Responding to Musk’s request to halt OpenAI’s conversion, U.S. District Judge Yvonne Gonzalez Rogers said the plaintiff had not met “the high burden required for a preliminary injunction.” 

However, she did agree to expedite the case, although it remains to be determined whether the case will be decided by a jury or solely by the judge.

Commenting on the decision, Musk’s attorney Marc Toberoff said: “We look forward to a jury confirming that [OpenAI CEO Sam] Altman accepted Musk’s charitable contributions knowing full well they had to be used for the public’s benefit rather than his own enrichment.”