Author: Shenchao TechFlow
Original title: Behind the "Century Lawsuit" between OpenAI and Musk: A Trial Over the AIGovernance Structure
Who is more panicked, who is pretending—perhaps the court transcript will provide the answer.
Today, the focus of the tech world is on Musk and his court battle.
Musk took the witness stand and was questioned by lawyers for nearly two hours. He spoke from his childhood in South Africa to the founding of SpaceX, from "The Terminator" to "Star Trek," trying to convince the nine jurors that everything he had ever done in life was aimed at saving humanity.
Then he said: "If it's acceptable to loot charitable organizations, American charitable giving will be destroyed."
On the surface, this case appears to be a personal feud between two tech billionaires. Musk demands the removal of Altman, the restoration of OpenAI’s nonprofit status, $134 billion in damages, and states that all compensation will go to OpenAI’s charitable entity.
OpenAI’s lawyer Bill Savitt opened with another version: “We are here because Mr. Musk did not get what he wanted at OpenAI. He left, saying they would fail. But my clients had the courage to succeed without him.”
Two narratives, each with its own script. But what’s truly worth unpacking isn’t who’s lying.
38 million nuclear buttons
Between 2016 and 2020, Musk donated approximately $38 million to $44 million to OpenAI. At the higher end, this represents about 0.005% of OpenAI’s current $85.2 billion valuation.
With this money, he is now eligible to petition the court to dismantle the structure of a trillion-dollar company, remove its CEO and president, terminate its partnership with Microsoft, and recover hundreds of billions in "unjust enrichment."
This would never happen in the normal business world. You’ve bought only 0.005% of a company—you wouldn’t even be allowed into a shareholder meeting. But OpenAI began as a 501(c)(3), a tax-exempt charitable organization under U.S. tax law. Musk’s money was donated, qualifying for a tax deduction, and thereby granting him legal standing to sue if the charity deviates from its mission.
Many people think donation simply means giving money. However, under U.S. charitable trust law, if you can prove that an organization has deviated from its founding mission, donors have legal recourse—regardless of the donation amount.
In other words, the $38 million given to Musk wasn't equity—it was a nuclear button.
And this button was pressed at the most critical moment for OpenAI. OpenAI has just completed a $122 billion funding round with an $852 billion valuation and is preparing for its IPO in the fourth quarter of this year. Kalshi’s prediction market places the probability of Musk winning at 47%.
In fact, OpenAI's greatest risk is its legacy corporate structure. It has grown a trillion-dollar body but is wearing a 501(c)(3) suit—one that could be pulled off at any moment, possibly at very little cost to the person doing so.
The open secret of Silicon Valley
OpenAI is not the only AI lab walking a tightrope between a nonprofit mission and commercial ambitions.
This playbook has a template in Silicon Valley: start as a nonprofit, attract top talent and early funding under the banner of “benefiting humanity,” and then introduce a for-profit subsidiary when funding needs escalate. The nonprofit shell retains the mission narrative, while the for-profit entity handles revenue generation and fundraising.
Mozilla has done it, and OpenAI is no exception: founded as a nonprofit in 2015, created a for-profit subsidiary in 2019, and then spun off into a public benefit corporation (PBC) in 2025—changing its structure, raising funds, and growing all along the way.
Anthropic chose a different path. From the outset, it registered as a Delaware public benefit corporation, taking the commercial entity route but adding a governance body called the Long-Term Benefit Trust (LTBT) to constrain corporate behavior. Anthropic’s co-founders likely observed OpenAI’s governance challenges and opted for a structure free from nonprofit constraints from the beginning.
But the key question is, who do these structures constrain?
In November 2023, OpenAI’s nonprofit board attempted to remove Altman. The power struggle lasted less than a week, after which Altman returned with Microsoft’s support, and the directors who voted to remove him were ousted instead. The nonprofit governance structure was crushed by commercial forces at the very moment it was needed most.
The lesson from OpenAI is that a nonprofit structure is a shield in the early stage, a decoration in the middle stage, and a vulnerability in the later stage. It fails to protect the founding mission while leaving a perfect entry point for external attackers.
The real game outside the courtroom
After addressing the structural issues, let’s turn our attention back to the people.
Musk compared himself to humanity's savior in court. But look at the current state of his own AI company, xAI.
Founded in 2023, its valuation surged to $230 billion by 2025—an astonishing pace. But by early 2026, things began to change. In February, SpaceX acquired xAI, followed by large-scale layoffs and restructuring. One by one, the co-founders departed. By the end of March, only Musk remained among the 11 co-founders. In April, the CFO left, and the VP of SpaceX’s Starlink was appointed as xAI’s new president.
After SpaceX took over, xAI essentially became a department rather than an independent company. The founders left for a simple reason: they joined an AI lab, not a subsidiary of SpaceX.
What about the enterprise side? Grok claims 64 million monthly active users, but that’s because it’s embedded within X’s interface—simply opening X counts as an active user. Pilot programs with Morgan Stanley and Palantir generated revenue in the range of hundreds of thousands to millions of dollars. xAI’s standalone annualized revenue (excluding X’s advertising and subscriptions) is projected to reach approximately $5 billion by the end of 2025.
Meanwhile, OpenAI's monthly revenue reached $2 billion in March 2026.
Elon Musk stands in court demanding the breakup of the world’s largest AI company, holding onto an AI firm whose founding team has vanished, revenue is nearly zero, and which has been absorbed by SpaceX.
He said it was for humanity. OpenAI’s lawyers said it’s because xAI can’t compete with OpenAI, so Musk is trying to use legal means to achieve what he can’t accomplish in business.
What’s the real reason? The timeline makes it clear. Musk filed the lawsuit in 2024, the same year xAI was just founded. In 2025, xAI went on a frantic fundraising drive to catch up with OpenAI in technology and scale. In 2026, xAI began to unravel internally, coinciding with the trial finally beginning.
Perhaps if xAI had been technically competitive with OpenAI, Musk might never have reached the point of going to court. Litigation is Plan B after failing in business competition.
The Ruins of the Winner
Now step back and look at the big picture.
The trial is expected to last three to four weeks. Judge Yvonne Gonzalez Rogers (who presided over the Epic v. Apple case) will issue a ruling based on the jury’s recommendations, expected in mid-May.
Most legal analysts believe the most likely outcome is a mixed ruling. The court may find that OpenAI violated its fiduciary duties to donors in certain respects, but it is unlikely to fully dismantle the for-profit structure or remove management. Regardless of who wins or loses, the losing party will appeal to the Ninth Circuit, and the case could drag on until 2027.
But regardless of the verdict, this lawsuit has already changed several things.
For OpenAI, it exposed a vulnerability: the legal structure of the world’s most highly valued private tech company could be upended by a small donation made a decade ago. This risk must be disclosed in the IPO prospectus, and every future investor will ask: Are there other historical donors who might come forward?
a16z co-founder Marc Andreessen said: "Regardless of the outcome, it has set a corporate governance template for all future cutting-edge AI labs. The path of starting as a nonprofit and transitioning mid-course needs to be reevaluated from today onward."
As for Musk himself, he stood in court telling a story about saving humanity. But his own AI company is being hollowed out, with its founding team gone and absorbed by SpaceX into a single department. He is using a lawsuit to cover up a building that is collapsing.
Ultraman had already left the courtroom before Musk testified.
Who is more panicked, who is putting on a show—perhaps the court transcripts will provide the answer. The true showdown of this high-stakes gamble may not come until the appeal window opens at the Ninth Circuit Court in 2027.
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