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OpenAI, the creator of ChatGPT, is reportedly in preliminary talks with California and Delaware regulators with the goal of transforming the firm into a for-profit structure.
The company, which is currently <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/openai-talks-raise-funds-100-billion-valuation" rel="null" target="null" text="null" title="null">valued</a> at $157 billion, has opened a dialogue with the office of Attorney General Rob Bonta in California and his counterpart in Delaware, <a data-ct-non-breakable="null" href="https://www.bloomberg.com/news/articles/2024-11-04/openai-in-talks-with-california-to-become-for-profit-company" rel="noopener noreferrer nofollow" target="_blank" text="null" title="null">according</a> to Bloomberg, citing sources familiar with the matter.&nbsp;
Reuters first <a data-ct-non-breakable="null" href="https://www.reuters.com/technology/artificial-intelligence/openai-remove-non-profit-control-give-sam-altman-equity-sources-say-2024-09-25/" rel="noopener noreferrer nofollow" target="_blank" text="null" title="https://www.reuters.com/technology/artificial-intelligence/openai-remove-non-profit-control-give-sam-altman-equity-sources-say-2024-09-25/">reported</a> in September that OpenAI was working on a plan to restructure its core business into a for-profit company that would no longer be controlled by its nonprofit board.
A simplified for-profit structure is more attractive to investors than a nonprofit research organization, though a key challenge in the discussions is valuing OpenAI’s intellectual property, which includes the highly lucrative large language model <a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/chatgpt-vs-grok-ai-differences" rel="null" target="null" text="null" title="null">chatbot</a>.
The process could be complex due to California law, which requires value assigned to nonprofit assets to be distributed to a charitable cause, but OpenAI’s primary assets are its intellectual property.&nbsp;&nbsp;
The transformation could also raise questions about whether the company, founded in 2015, is upholding its original benevolent public mission of building AI products safe and beneficial to <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/open-ai-fears-people-bonds-with-ai" rel="null" target="null" text="null" title="null">humanity</a>.
In May 2023, tech billionaire Elon Musk <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/elon-musk-criticizes-openai-for-profit-after-investment" rel="null" target="null" text="null" title="null">questioned</a> the legality of the transition to for-profit following a $50 million investment into the firm.&nbsp;
“OpenAI was created as an open-source, nonprofit company to serve as a counterweight to Google, but now it has become a closed-source, maximum-profit company effectively controlled by Microsoft,” he said at the time.&nbsp;
Musk sued OpenAI and CEO Sam Altman in February 2024 for breach of contract but <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/elon-musk-drops-lawsuit-against-openai-sam-altman" rel="null" target="null" text="null" title="null">dropped</a> the lawsuit in June.
In a statement to Bloomberg, OpenAI nonprofit board chairman Bret Taylor said the nonprofit would continue to exist as part of any new corporate structure, adding:
<blockquote>
 “Any potential restructuring would ensure the nonprofit continues to exist and thrive and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission.”
</blockquote>
The firm is “committed to protecting charitable assets for their intended purpose,” said a spokesperson for Bonta’s office.&nbsp;
<figure>
 <img alt="OpenAI" src="https://s3.cointelegraph.com/uploads/2024-11/0192fadc-60bb-7ed1-99ba-f05e99171ac3" title="">
 <figcaption style="text-align: center;">
 GPT models’ test evaluation compared to competitors. Source: OpenAI
 </figcaption>
</figure>
The company created a capped for-profit subsidiary to help fund the high costs of AI model development in 2019.&nbsp;
A period of turmoil followed, including CEO <a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/sam-altman-ceo-openai" rel="null" target="null" text="null" title="null">Sam Altman’s</a> brief firing and rehiring. Tensions on the nonprofit board mounted over balancing AI safety with the pressure to commercialize.&nbsp;
Related: <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/openai-o1-model-reasoning-stem-abilities" rel="null" target="null" text="null" title="null">OpenAI says latest o1 model on ‘new level,’ can ‘think before it answers’</a>
On Oct. 23, long-time OpenAI safety researcher Miles Brundage <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/openai-agi-readiness-chief-quits" rel="null" target="null" text="null" title="null">quit the firm</a>, saying that he planned to start a new nonprofit or join an existing one to work on AI policy research and advocacy.
In early October, it was <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/openai-losses-profit-projections-2029" rel="null" target="null" text="null" title="null">reported</a> that OpenAI was unlikely to turn a profit until 2029 after it hit $100 billion in revenue. It was projected to incur a loss of about $5 billion in 2024.&nbsp;
Magazine: <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/ai-more-power-hungry-bitcoin-profits-pose-risks-bitcoin-miners/" rel="null" target="null" text="null" title="null">AI may already use more power than Bitcoin — and it threatens Bitcoin mining</a>

OpenAI in talks with regulators to become a for-profit company: Report

Cointelegraph

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