A US judge has rejected Elon Musk's attempt to block OpenAI from transitioning into a for-profit business, dealing a setback to the Tesla CEO in his ongoing legal dispute with OpenAI's leadership.

US District Court Judge Yvonne Gonzalez Rogers ruled on Tuesday that Musk and his xAI startup failed to demonstrate the need for an injunction against OpenAI as the case proceeds to trial.

Legal Battle Over OpenAI’s Nonprofit Origins

Musk had sued OpenAI in California federal court, alleging that the company violated antitrust laws and betrayed its original mission by shifting away from its nonprofit roots. His lawsuit argued that OpenAI co-founders, including CEO Sam Altman, had misused Musk’s financial backing to build a for-profit enterprise.

However, the judge noted that Musk’s emails and social media posts might not constitute a legally binding agreement regarding OpenAI’s nonprofit status, leaving room for debate in the trial.

OpenAI’s Future as a For-Profit Entity

The ruling allows OpenAI to continue its hybrid corporate structure, which includes a nonprofit entity with a revenue-generating subsidiary. Altman has defended the shift, emphasizing that a for-profit model is necessary to sustain the massive financial demands of developing and deploying AI technologies.

Earlier this year, OpenAI’s board rejected a $97.4 billion buyout offer led by Musk, stating that the company was not for sale and accusing Musk of attempting to disrupt competition.

Musk’s AI Rivalry and Departure from OpenAI

Musk, who co-founded OpenAI in 2015 and contributed $45 million in initial funding, left the company in 2018. OpenAI cited concerns about a conflict of interest as Tesla expanded its AI ambitions.

In response, Musk launched his own AI company, xAI, in 2023, further intensifying his rivalry with OpenAI.

With the legal challenge over for now, OpenAI remains free to pursue its for-profit ambitions, while the court case heads to trial later this year.