OpenAI Executives Rattled by Campaigns to Derail For-Profit Restructuring

Startup leaders discuss last-ditch prospect of leaving California if regulators complicate switch

- Berber Jin

OpenAI executives are growing concerned that mounting political scrutiny in California could stymie their efforts to become a for-profit company and have discussed a last-ditch option of moving out of the state.

Some of California's biggest philanthropies, nonprofits, and labor groups are joining forces to push back on the startup's high-stakes restructuring plan. Because OpenAI is controlled by a nonprofit, they are asking the state's attorney general to ensure the new company it creates doesn't violate the state's charitable trust law.

Attorneys general in California and Delaware are investigating OpenAI's proposed plan. The regulators have a legal responsibility to protect their states' charities. They have the power to sue OpenAI for potentially breaking nonprofit law or require the company to pay a settlement as a condition for the restructure.

An OpenAI spokesman said the company has no plans to leave California.

Failing to restructure could be catastrophic for the world's most valuable startup, imperiling its future fundraising efforts and a potential public listing.

Led by CEO Sam Altman, OpenAI is currently run as a subsidiary that doesn't issue traditional equity and is controlled by a nonprofit parent. That is an unpopular structure among its investors, who are pushing for the change.

OpenAI's financial backers have conditioned roughly $19 billion in funding—almost half of the startup's total in the past year—on receiving shares in the new for-profit company. If the restructure doesn't happen, they could pull their money, hampering OpenAI's costly ambitions to build giant data centers, make custom chips, and stay at the bleeding edge of AI research.