We watched a courtroom drama in Oakland made for motion pictures. Elon Musk opposed to Sam Altman, a surprise firing and reinstatement, the CEO of Microsoft testifying as “the oldest person in the room.” The spectacle kept our eyes on the court. Yet the reckoning, if it comes, will have to come from Washington, DC
The Silicon Valley soap opera hides a more important question than it says during a tumultuous weekend in November 2023. It’s a question that should concern every nonprofit, and every taxpayer. As the founder and CEO of the Allen Institute for AI – a non-profit research lab launched in 2014, a year before OpenAI, and still a non-profit organization today – I want to ask you clearly: can a charity, funded by tax-deductible donations, be turned into a corporation?
If your answer is yes, then American charity law is a tax-advantaged place for any type of business that will later prove profitable, and the word “nonprofit” means whatever the founders decide it means once the assets become valuable enough. If your answer is no, then someone has to stop this. California Attorney General Rob Bonta and Delaware Attorney General Kathy Jennings chose not to.
A nonprofit is not an umbrella you fold up when the sun comes out. It is a permanent obligation.
That example — that charitable assets can be moved to private equity-style structures as long as some portion of the dividends flow back to the nonprofit — will change the next decade of nonprofit-to-profit technology transformation. It was accepted without judicial review, which is why we are now watching Elon Musk litigate this question. The defendants made a case against him. The precedent OpenAI sets is a real problem.
This argument has been vigorously waged by UCLA legal scholars, Citizen Citizen, Nobel laureates, fifty California foundations, and former OpenAI employees for two years, through letters, briefs, and petitions to both AGs. What is lacking is enforcement.
Defenders of the reform will tell you that OpenAI’s non-profit board still controls the new public for-profit organization, that the foundation now has a 26 percent stake worth about $130 billion, that the AGs issued the actual approvals, and that anything else — blocking the reform — would hurt value and accomplish nothing. All of these arguments have some merit. The first three are partly true.
But hold on. We have already started the research. The result is in.
The firing of Sam Altman in November 2023 was a test of the power of whether nonprofit governance was real. The board used its most important power – removing the CEO – and was forced to withdraw five days later by employees and equity investors. A Microsoft executive testified Monday that he should have stepped in as “the adult in the room.” The authority of the board evaporated when it tried to exercise it.
Public Citizen made it clear in its September 2025 letter to two AGs: the nonprofit has become a “rubber stamp for profit.”
That’s the test case Sacramento and Wilmington had in front of them, and one they didn’t pursue. On October 28, Bonta issued a statement of agreement blessing the refinancing by stating that the non-profit’s control is maintained. Kathy Jennings in Delaware issued a Statement of Objection the same day, following California almost word for word. So if the compensation tells you that the nonprofit’s control is maintained, ask which version — the version on paper, or the version that holds up in the audit.
The deeper question is why this case was solved at all. Both offices had standing, resources, and authority. The reasons they don’t use it are political – two state AGs, each with one charity, weighing up a fight against the most important private company in history, its main investor, and a White House that has made the reign of AI a clear industrial policy.
Judge Yvonne Gonzalez Rogers could still rule that the bailout be revoked, Altman and Brockman removed, and damages awarded to the organization. Any of these can be important. But the case turns on some of Musk’s claims and Musk’s special standing, and even a major ruling in his favor won’t bind the next federal attorney weighing the next reform. The preceding problem overrides the decision.
The solution is the government’s case. State AGs have spoken; the way forward goes through Washington, where the IRS, tax-writing committees in both chambers, and antitrust agencies each have a role to play. A federal lawsuit could find that the next AI lab that studies this process will face consequences.
Examples are more important than AI. It is important for every nonprofit organization, and for every founder who has taken the hard road because they believe the rules mean something. We need government officials who have the courage to enforce laws that protect the nonprofit system. Sacramento and Wilmington failed. Washington hasn’t tried.
Disclosure: The author serves as a retained expert for the plaintiffs in the New York Times v. OpenAI and Microsoft copyright. The opinions expressed are his alone.
