EyesOnOpenAI, a coalition of dozens of California foundations and nonprofits, is challenging OpenAI, the company behind ChatGPT, accusing it of failing to uphold the transparency and accountability standards required of charitable organizations. The coalition called on the California attorney general to investigate whether up to $300 billion in OpenAI’s charitable assets are being used for private profit instead of public good.
OpenAI operates under an unusual structure where a nonprofit entity oversees a for-profit subsidiary that develops commercial AI products like ChatGPT. EyesOnOpenAI has been raising concerns about whether the company is staying true to its founding mission of developing AI that benefits humanity.
The EyesOnOpenAI coalition points to OpenAI’s recent renegotiations with Microsoft and other investors as proof of an interest in profit over public good.
This May, the coalition met with California Attorney General Rob Bonta and followed up with an urgent letter in June, urging Bonta to investigate OpenAI’s nonprofit structure.
“If the nonprofit’s board overlaps too much with the leadership of the for-profit, it becomes hard to tell whose interests are being served.”
What happens with OpenAI will set a precedent for how nonprofits navigating the fast-moving AI sector are held accountable and whether charitable resources are truly protected.
Control Without Accountability
At the center of the coalition’s concerns is how OpenAI is governed and whether its structure still protects the public interest. Earlier this year, OpenAI proposed changing its governance structure to reduce the nonprofit’s role, but after public backlash, announced the nonprofit board would continue to oversee the for-profit entity. EyesOnOpenAI argues that’s not enough to protect charitable assets or uphold the mission to advance AI for the benefit of humanity.
“The OpenAI situation has raised concerns about what happens when a nonprofit grows and then partners with a for-profit company,” Benson Varghese, a lawyer and founder and managing partner of Texas-based law firm Varghese Summersett, told NPQ. “If the nonprofit’s board overlaps too much with the leadership of the for-profit, it becomes hard to tell whose interests are being served.”
The board of any nonprofit organization must be fully independent and able to act “in the best interest of the public mission, not the business side of things,” Varghese said. “If that line gets blurry, it’s a problem, even if no one meant to do anything wrong.”
Joanna Smykowski, licensed attorney, legal tech expert, and legal contributor at Custody X Change, agrees. “Many nonprofits start with a strong public-facing purpose, but if board membership becomes too tightly aligned with commercial interests or internal leadership, it weakens the checks and balances,” Smykowski told NPQ.
Smykowski says this issue goes beyond governance to a legal risk. To stay on the right side of the law, the nonprofit’s decisions must serve public benefit over profits or private goals.
EyesOnOpenAI has criticized OpenAI’s revised plan, arguing the lack of transparency makes it impossible for the public to know whether it’s pursuing its mission or chasing profits. The coalition also wants answers about who ultimately controls the nonprofit entity’s charitable assets and how they are being used to serve OpenAI’s mission.
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“Intellectual property, brand value, and access to data can also qualify as charitable assets.”
Public Assets, Private Gains
Upon its founding, OpenAI had a mission to make AI benefit humanity; as a tax-exempt organization, the assets of the nonprofit must be used for the public good. But EyesOnOpenAI is concerned that some charitable assets have been used for commercial purposes and in ways that don’t follow the laws that govern the nonprofit sector.
“Nonprofit work is based on ethical use of charitable assets. The purpose of the charitable funds is to act in the interest of people, not in the interests of private and business people,” said Marcus Denning, a legal practitioner in the commercial and nonprofit fields and senior lawyer for MK Law. “The issue of the way that charitable money is being spent, particularly when an organization such as OpenAI has considerable commercial stakes, must be examined thoroughly.”
And “it’s not just about money,” noted Smykowski. “Intellectual property, brand value, and access to data can also qualify as charitable assets. If those are transferred, repurposed, or monetized in ways that benefit a for-profit arm, there may be grounds to challenge how those assets were handled.”
Ignorance of the law—even when it comes to relatively novel nonprofit structures like OpenAI’s—is not an excuse for breaking it.
Said Varghese, “For the broader nonprofit world, this should be a reminder….When you take donations or enjoy tax benefits, you have to be extra careful that everything you do lines up with your mission.”
What’s Next?
EyesOnOpenAI has asked the California attorney general to require that OpenAI’s nonprofit assets unrelated to its commercial operations be accurately valued and transferred to a separate, fully independent nonprofit. This new entity would be governed by a board selected through a transparent process, with ongoing accountability measures to ensure it remains independent. The board would have the authority to monitor OpenAI’s commercial operations and enforce oversight.
“When you take donations or enjoy tax benefits, you have to be extra careful that everything you do lines up with your mission.”
In August, public pressure on OpenAI intensified as over 100 respected voices, including EyesOnOpenAI, former OpenAI staff, public figures, nonprofits, professors, Nobel Prize winners, and civil society groups, released an open letter again calling for transparency and warning that OpenAI’s actions are a threat to the public interest and the responsible development of AI.
The situation provides important lessons for nonprofit leaders. “There is a broader implication for philanthropy,” Smykowski told NPQ. “If high-profile, tech-backed nonprofits can shift direction without clear public accountability, it may lead to more scrutiny of donor-advised funds, fiscal sponsorships, and other structures that rely on trust. For nonprofit funders and boards, this is a reminder that transparency is not just about public statements. It is about documenting decision-making, preserving independence, and making sure every action aligns with the original tax-exempt purpose.”
