OpenAI scraps for-profit transition after pushback from regulators and critics

OpenAI has abandoned a plan to convert into a fully for-profit company, opting instead to remain under nonprofit governance, CEO Sam Altman confirmed in a message to staff on Monday.

The proposed transition, meant to reassure investors and unlock large-scale funding, sparked significant pushback from regulators, AI ethics advocates, and some of the company’s founders. 

Critics argued that a move toward profit-maximisation could put society at risk by prioritising commercial gain over responsible AI development.

Altman said the decision followed consultations with civic leaders and officials in California and Delaware, the two states that oversee OpenAI’s legal status. “We decided for the nonprofit to stay in control,” he wrote in a message later posted on the company’s site.

OpenAI, launched in 2015 as a nonprofit, introduced a unique “capped-profit” model to attract investment while maintaining its founding mission. 

However, a 2024 proposal to become a public benefit corporation — allowing more traditional profit-seeking operations — drew concern, including a lawsuit from Elon Musk, who argued the plan defied OpenAI’s founding principles.

In the updated arrangement, OpenAI’s for-profit operations will have greater commercial freedom but will remain accountable to the nonprofit board, which will retain overall control.

The company had come under intense scrutiny in late 2023 when the board abruptly ousted Altman, only to reinstate him following staff backlash.

That episode rattled investors, many of whom pushed for more conventional corporate governance structures.

Despite the corporate drama, OpenAI has remained a global AI leader, known for launching ChatGPT and pushing the boundaries of generative AI technology.

Altman said the decision to retain nonprofit oversight will help OpenAI balance innovation with safety. “We believe this sets us up to continue to make rapid, safe progress,” he added.