OpenAI discussed relocating from California amid legal, regulatory scrutiny over conversion
Executives fear losing about $19 billion in investor funding if recapitalisation fails
State attorneys general probe safety and governance, escalating public and legal pressure
OpenAI says no active move; negotiating with regulators to preserve commitments
OpenAI executives have quietly discussed the possibility of relocating the company out of California amid rising political and legal pressure over its planned conversion from a nonprofit-controlled structure into a for-profit entity, the Wall Street Journal reported.
According to the report, company leaders fear the move could derail about $19 billion in investor funding tied to the restructuring. However, OpenAI told the Journal it has no active plans to move.
The talks come after mounting challenges from a coalition of nonprofits, labour groups, philanthropies and rival firms that argue the conversion may violate charitable-trust rules and betray OpenAI’s founding mission.
Attorneys general in California and Delaware have opened inquiries into the proposed restructuring, and that regulatory scrutiny has become a central worry for OpenAI leadership because failure to complete the recapitalisation could prompt investors to withdraw commitments.
Safety Concerns Intensify Scrutiny
Separately, state attorneys general have escalated pressure on OpenAI over safety issues, citing recent reports of serious harm allegedly linked to prolonged use of large-language models.
California's and Delaware's offices have sent stern letters demanding stronger protections for young users and closer adherence to safety commitments, a line of inquiry that has added political momentum to objections against the restructuring. OpenAI has said it is engaging with regulators and revising governance proposals to address concerns.
Major industry players have also weighed in. Meta and other critics have urged state officials to block or tightly condition any conversion, arguing that permitting a move could set a precedent for mission drift by institutions that start as nonprofits.
Those public campaigns, combined with legal challenges and advocacy letters, have amplified the reputational and legal risks around the plan.
What's at Stake?
OpenAI’s proposed recapitalisation is widely reported to be central to securing substantial new capital for model training, infrastructure and product expansion.
If the conversion is delayed, blocked or substantially altered, investors could reassess commitments, a scenario company executives fear would imperil long-term plans. The debate also raises broader policy questions about how emerging, mission-driven AI organisations should be governed as they commercialise.
OpenAI is engaged in talks with state and Delaware officials while making public concessions aimed at retaining safety oversight and the nonprofit’s influence. Regulators’ findings, ongoing litigation and any investor responses in the coming weeks will be decisive.
Lawmakers, civil society groups and the company’s own employees are expected to keep a close watch, since any relocation or restructuring outcome could reshape how cutting-edge AI firms balance fundraising, governance and public accountability.
