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Meta Urges California Attorney General to Block OpenAI’s Move to For-Profit Status

By  |  December 15, 2024

Meta Platforms has called on California’s Attorney General, Rob Bonta, to intervene in OpenAI’s proposed transition to a for-profit structure, according to a report by The Wall Street Journal. The letter, dated Thursday, outlines Meta’s concerns about the broader implications of such a move on Silicon Valley’s innovation ecosystem.

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    As reported by the Journal, Meta warned that OpenAI’s transition could create a troubling precedent, allowing startups to leverage the benefits of nonprofit status during their formative years before shifting to profit-driven models. This strategy, the company argues, could unfairly enable early nonprofit investors to reap financial rewards akin to those in traditional for-profit ventures, while also benefiting from tax advantages.

    “OpenAI’s conduct could have seismic implications for Silicon Valley,” Meta stated in its letter, per the Journal. The tech giant suggested that this model, if validated, could disrupt established norms for how startups raise capital and grow within the tech sector.

    Neither Meta nor the California Attorney General’s office immediately responded to requests for comment from Reuters.

    Read more: Turkey Ends Meta Investigation Over Threads and Instagram

    The development follows a lawsuit filed by billionaire Elon Musk against OpenAI and its CEO, Sam Altman, in August. Musk accused the company of prioritizing profits over its stated mission of advancing artificial intelligence for the public good, allegedly violating prior agreements. In November, Musk sought a preliminary injunction to halt OpenAI’s transition to a for-profit model, with the case now being overseen by U.S. District Judge Yvonne Gonzalez Rogers in Oakland.

    OpenAI, for its part, has defended its restructuring plans. Chairman Bret Taylor emphasized in a statement that any potential changes would ensure the nonprofit arm remains integral to the organization’s mission and would benefit from its stake in the for-profit entity. “Our work remains ongoing as we continue to consult independent financial and legal advisors,” Taylor added.

    Meta’s letter also expressed support for Musk’s broader effort to advocate for public interest in the matter, according to the Journal. The company highlighted the importance of ensuring that decisions surrounding OpenAI’s structural changes are carefully scrutinized to prevent unintended consequences for the tech industry.

    Source: The Wall Street Journal.