A judge in the Northern District of California has denied OpenAI’s motion to dismiss Elon Musk’s lawsuit against the company, its CEO Sam Altman, and Microsoft’s largest investor, allowing the case to proceed to trial on its merits. Musk accuses OpenAI of breaching agreements and committing fraud in its conversion to a commercial entity.
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U.S. District Judge Yvonne Gonzalez Rogers denied OpenAI’s motion to dismiss a case brought by Elon Musk in 2023. In his lawsuit, Musk accuses Sam Altman, OpenAI, and its largest investor, Microsoft, of violating the terms of the agreement under which he provided funding at the start of the project. He claims that OpenAI’s transformation from a nonprofit to a for-profit violates those agreements and is fraudulent.
OpenAI was founded in 2015 as a nonprofit with a mission to develop safe AI systems for the benefit of all humanity. Musk, one of OpenAI’s co-founders, claims he provided much of the company’s seed money on the promise of maintaining its nonprofit status and structure. The judge found that the allegations made by Musk’s lawyers were sufficient to warrant the lawsuit. Despite the lack of a written agreement, Musk is justified in citing the existence of a contract, the ruling says.
In March, the court denied Musk’s request for a preliminary injunction to prevent OpenAI from going commercial. However, in the same ruling, the judge agreed to expedite the case by severing some of the claims in the original lawsuit for priority litigation. The main hearing in the case is scheduled for March 2026. OpenAI’s motion to dismiss was granted in part, but key provisions, including allegations of breach of contract and misrepresentation, remain.
The court found that Musk had made a valid allegation that the defendants had promised to maintain OpenAI’s nonprofit status and structure in order to receive funding from him, but in fact intended to use those funds to create a for-profit entity aimed at enriching themselves. That part of the argument was preserved by the judge for further trial.
In April 2025, OpenAI filed a countersuit against Musk. In the document, the company claims that Musk is using unfair practices to undermine OpenAI’s transformation into a commercial entity. OpenAI claims that the plaintiff’s actions are aimed at slowing the company’s development and gaining control over leading AI research for personal gain.
OpenAI is currently run by a nonprofit board of directors with the mission of creating powerful AI for the benefit of humanity. The company is attempting to simplify its unique corporate structure with the goal of becoming a for-profit organization with public benefit status.
The transformation is intended, among other things, to make it easier to raise capital from outside investors. The effort has drawn criticism from former employees and AI experts including Geoffrey Hinton, Margaret Mitchell, and Stuart Russell, who say it hands over control of AI development to a company driven by commercial gains.