OpenAI is taking steps toward transforming its organisational structure from a non-profit to a for-profit entity. To this end, the company is in talks with regulatory bodies in California and Delaware to seek approval for this strategic shift.
California’s Attorney General, Rob Bonta, is expected to play a key role in evaluating the value of OpenAI’s assets, particularly its intellectual property portfolio, including the ChatGPT app and other AI innovations, reports Bloomberg.
The Attorney General reportedly ensures that any charitable assets are used for their intended purposes, reflecting the state’s commitment to safeguarding public benefit.
In addition, Delaware’s Attorney General, Kathleen Jennings, has contacted OpenAI and requested that it submit its restructuring plans for review.
In 2019, OpenAI created a capped for-profit subsidiary, which marked an early acknowledgement of the immense financial demands required to develop advanced AI systems.
OpenAI has pledged that its non-profit arm will persist even under the for-profit structure, ensuring it receives value for its stake in the company.
The company’s journey has been marked by a balancing act between research for societal benefit and the need to commercialise its technology, leading to significant financial pressures.
This dynamic came to a head in 2023 when the nonprofit board briefly removed CEO Sam Altman amid rising tensions over AI safety concerns versus profitability. Altman’s return signalled a renewed focus on balancing OpenAI’s mission and pursuing a sustainable business model.
Central to OpenAI’s discussions with regulators is the question of valuing its intellectual property, a portfolio that includes propriety AI technologies like ChatGPT. Legal experts note that California’s strict guidelines for nonprofit-to-profit conversions will require OpenAI to justify how it assesses these assets.
If OpenAI is successfully restructured, it will adopt a public benefit corporation model. In this setup, the nonprofit arm would maintain a “material” stake in the new entity, preserving its mission-driven mandate within a more traditional corporate framework.
In the News: Supply chain attack targets NPM repository with malicious packages
