Behind OpenAI’s “Century-Long Litigation” with Elon Musk: A Trial on AI Governance Structure
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Behind OpenAI’s “Century-Long Litigation” with Elon Musk: A Trial on AI Governance Structure
Who is more panicked, and who is acting? Perhaps the trial transcripts will provide the answer.
Navigating Web3 tides with focused insightsBy TechFlow
Today’s spotlight in the tech world is on Elon Musk—and his courtroom showdown.
Musk took the stand as a witness and was questioned by attorneys for nearly two hours. He recounted his childhood in South Africa, the founding of SpaceX, and drew parallels from “The Terminator” to “Star Trek,” attempting to convince the nine jurors that everything he has ever done was aimed at saving humanity.
Then he said this: “If the verdict says it’s okay to loot charitable organizations, U.S. charitable giving will be destroyed.”
On the surface, this case is a private feud between two tech billionaires. Musk seeks to remove Sam Altman as CEO, restore OpenAI’s nonprofit status, and recover $13.4 billion—stipulating that all damages awarded would go directly to OpenAI’s charitable entity.
OpenAI’s attorney Bill Savitt opened with a different narrative: “We are here because Mr. Musk did not get his way at OpenAI. He walked away, declaring they would surely fail. But my client had the courage to succeed—without him.”
Two competing stories, each with its own script. Yet what truly warrants unpacking isn’t who’s lying.
The $38 Million Nuclear Button
Between 2016 and 2020, Musk donated approximately $38 million to $44 million to OpenAI. At the upper end, that represents roughly 0.005% of OpenAI’s current $852 billion valuation.
With that sum, Musk now claims standing to ask the court to dismantle a trillion-dollar company’s entire structure—to remove its CEO and president, terminate its partnership with Microsoft, and claw back hundreds of billions in alleged “unjust enrichment.”
This would be impossible in conventional business logic. Owning just 0.005% of a company wouldn’t even get you through the door of its shareholder meeting. But OpenAI began life as a 501(c)(3) organization—a tax-exempt charitable entity under U.S. law. Musk’s contribution was a donation, qualifying for a tax deduction—and granting him, as a donor, legal standing to sue if the organization strays from its founding mission.
Many assume donations are purely philanthropic gestures. But under U.S. charitable trust law, donors retain legal recourse if they can demonstrate a material deviation from an institution’s original mission—regardless of donation size.
In other words, those $38 million didn’t buy Musk equity. They bought him a nuclear button.
And that button was pressed at OpenAI’s most critical juncture. The company had just closed a $122 billion funding round, reached an $852 billion valuation, and was preparing for an IPO this coming Q4. Kalshi’s prediction market currently gives Musk a 47% chance of winning.
In reality, OpenAI’s greatest vulnerability lies in its legacy corporate architecture: It has grown a trillion-dollar body—but still wears the legal garment of a 501(c)(3). That garment can be stripped off at any moment—and the person doing the pulling may pay only a trivial cost to do so.
Silicon Valley’s Open Secret
OpenAI isn’t the only AI lab walking the tightrope between “nonprofit mission” and “commercial ambition.”
This playbook has become a Silicon Valley template: Start as a nonprofit, brand yourself around “benefiting humanity” to attract top talent and early capital; then, when real money is needed, spin up a for-profit subsidiary. The nonprofit shell preserves the mission-driven narrative, while the for-profit arm handles revenue generation and fundraising.
Mozilla did it. So did OpenAI: founded as a nonprofit in 2015, launching a “capped-profit” subsidiary in 2019, and reorganizing into a Public Benefit Corporation (PBC) in 2025—restructuring, raising, and scaling all along the way.
Anthropic chose a different path. From day one, it incorporated as a Delaware PBC—a commercial entity outright—but added a governance mechanism called the “Long-Term Benefit Trust” (LTBT) to constrain corporate behavior. Anthropic’s co-founders likely opted for this structure precisely because they foresaw OpenAI’s governance pitfalls—and wanted to avoid nonprofit baggage from the outset.
But the key question remains: Who, exactly, do these structures constrain?
In November 2023, OpenAI’s nonprofit board attempted to fire Sam Altman. That “palace coup” lasted less than a week—Altman returned backed by Microsoft, and the board members who tried to oust him were themselves removed. When governance mattered most, the nonprofit framework was crushed by commercial forces.
OpenAI’s lesson? A nonprofit structure serves as a shield in early days, decoration in mid-stage, and a liability in late-stage—it protects neither the founding mission nor the company itself, while offering attackers a perfect legal entry point.
The Real Game Outside the Courtroom
Having addressed structural issues, let’s turn back to people.
In court, Musk cast himself as humanity’s savior. But what’s happening with his own AI company, xAI?
Founded in 2023, xAI hit a $230 billion valuation by 2025—an astonishing pace. Yet by early 2026, cracks emerged. In February, SpaceX acquired xAI and launched sweeping layoffs and restructuring. Co-founders departed one after another. By late March, only Musk remained among the original 11 co-founders. In April, the CFO resigned—and SpaceX’s Starlink VP stepped in as xAI’s new president.
Under SpaceX’s control, xAI effectively became a division—not an independent company. Founders left for a simple reason: They joined an AI research lab, not a SpaceX sub-department.
On the enterprise side? Grok claims 64 million monthly active users—but that figure counts anyone who opens X (formerly Twitter), since Grok is embedded in X’s interface. Pilot programs with Morgan Stanley and Palantir generated revenues in the “hundreds of thousands to low millions” range. Excluding X’s ad and subscription revenue, xAI’s standalone annualized revenue stood at roughly $500 million by end-2025.
Meanwhile, OpenAI’s monthly revenue hit $2 billion in March 2026.
So Musk—leading an AI company whose founding team has disbanded, whose enterprise revenue is near-zero, and which has been absorbed into SpaceX—stands in court demanding the dismantling of the world’s largest AI company.
He says it’s for humanity. OpenAI’s lawyers say it’s because xAI can’t beat OpenAI commercially—so Musk is resorting to litigation to achieve what he couldn’t accomplish in the marketplace.
What’s the real reason? The timeline tells the story. Musk filed suit in 2024, shortly after xAI’s founding. In 2025, xAI raised aggressively, racing to close the technological and scale gap with OpenAI. In 2026, xAI collapsed internally—just as this trial finally commenced.
Perhaps—if xAI had been able to compete head-to-head with OpenAI on technology, Musk never would have entered this courtroom. Litigation is Plan B after commercial competition fails.
The Winners’ Rubble
Now zoom out for the full picture.
This trial is expected to last three to four weeks. Judge Yvonne Gonzalez Rogers—the same jurist who presided over Epic v. Apple—will issue a ruling based on the jury’s recommendation, likely by mid-May.
Most legal analysts anticipate a mixed verdict. The court may find that OpenAI breached certain fiduciary duties owed to donors—but it’s highly unlikely to fully unwind the for-profit structure or remove management. Regardless of outcome, the losing party will appeal to the Ninth Circuit Court of Appeals, potentially dragging the case into 2027.
Yet regardless of the verdict, this lawsuit has already changed several things.
For OpenAI, it exposed a structural weakness: The world’s most highly valued privately held tech company can be legally destabilized by a modest donation made a decade ago. Its IPO prospectus must disclose this risk—and every future investor will ask: Are there other historical donors waiting in the wings?
Marc Andreessen, co-founder of a16z, put it plainly: “Regardless of the outcome, this case sets a new governance template for all frontier AI labs going forward. The path of starting nonprofit and later pivoting to for-profit must now be re-evaluated—starting today.”
For Musk personally, he stood in court telling a story about saving humanity—even as his own AI company hollows out: its founding team gone, its independence erased, its identity subsumed into SpaceX. He’s using a courtroom battle to mask a crumbling edifice.
And Sam Altman had already left the courtroom before Musk even took the stand.
Who’s more anxious? Who’s performing? Perhaps the trial transcripts will reveal the answer. But it may not be until the Ninth Circuit’s appeals window in 2027—when the true stakes of this high-stakes gamble are finally laid bare.
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