Meta is asking the US government to block OpenAI’s transition to a for-profit business

Dear General Good:

As a California-based company creating generative artificial intelligence technology, Meta Platforms, Inc. (“Meta”) is deeply concerned by OpenAI’s attempt to abandon the nonprofit status under which it was founded in order to establish a for-profit entity. We encourage you to review the proposed transaction, including the nature and timing of the transfer of assets from the OpenAI nonprofit entity to other entities. Failure to hold OpenAI accountable for its decision to create a nonprofit could lead to a proliferation of similar startup ventures that are theoretically charitable until they become potentially profitable. The people of California have a direct and urgent interest in stopping this behavior. All activities of OpenAI and its related entities should cease to protect both investors and consumers.

In 2015, OpenAI filed its original certificate of incorporation with the State of Delaware, which reads:

This Corporation is a not-for-profit corporation incorporated solely for charitable and/or educational purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or the applicable provisions of any future United States tax laws. The specific purpose of this corporation is to provide financial resources for the research, development and distribution of technologies related to artificial intelligence… The corporation is not established for the private profit of any person… The assets of this corporation are irrevocably dedicated to the benefit of[se] purposes… and no portion of the net income or assets of this corporation shall at any time be appropriated for the benefit of any director, officer or member of this corporation or for the benefit of any private individual.

Years later, OpenAI confirmed this commitment on its own website:

Seeing no clear path in the public sector and given the success of other ambitious projects in private industry, [OpenAI] decided to implement this project with private funds, bound by a forceful commitment to the public good. [OpenAI] it was initially believed that a 501(c)(3) would be the most effective tool to guide the development of unthreatening and broadly beneficial AGI, unencumbered by profit incentives.

Taking advantage of its nonprofit status, OpenAI has raised billions of dollars in capital from investors to continue its purported mission. The company represented to the state of California and the world that it would be operated without a profit motive. Investors and the public were right to rely on this assurance.

Now OpenAI wants to change its status while retaining all the benefits that have allowed it to reach the level it is today. This is wrong. OpenAI should not be allowed to flout the law by seizing and re-appropriating the assets it has built as a charity and using them for potentially huge private profits.

Moreover, the conversion proposed by OpenAI does not merely mean a future, potential abuse of the corporate form. We also urge you to review whether OpenAI’s past practices are consistent with its obligations as a nonprofit organization – in particular, whether it has improperly depleted the nonprofit’s assets by transferring assets to third parties.

OpenAI’s behavior could have seismic consequences for Silicon Valley. If allowed, OpenAI’s restructuring would represent a paradigm shift for tech startups; allowing this restructuring would merely encourage investors to set up the organization as a nonprofit, raise hundreds of millions of dollars in tax-free donations to support research and development, and then adopt for-profit status once its technology becomes commercially viable point of view.

Indeed, if OpenAI’s fresh business model proves successful, nonprofit investors will receive the same for-profit benefits as those who conventionally invest in for-profit companies, while benefiting from tax breaks provided by the government and, ultimately, the public. This would disrupt the market by essentially requiring every startup looking to stay competitive to follow the same playbook.

We understand that Elon Musk and Shivon Zilis are currently seeking to represent the public interests in Musk v. Altman, No. 4:24-cv-04722-YGR (N.D. Cal.). While we also urge your office to take direct action, we believe that Mr. Musk and Ms. Zilis are qualified and well-positioned to represent the interests of Californians on this matter. Their early, foundational roles in the creation and operation of OpenAI and as earlier members of the Board of Directors allow them to understand better than anyone what OpenAI was intended to be and how its current conduct deviates from its charitable mission.

Meta is committed to openness and transparency in the transformative field of artificial intelligence. OpenAI’s charitable promise to develop unthreatening and broadly beneficial AI, free from commercial pressures, is vital and must be kept. Given the breakneck pace at which OpenAI continues to convert for profit, this is a special case requiring urgent action.

We appreciate your consideration of our views and are ecstatic to answer any questions you may have.

With respect

Metaplatforms