On Friday, regulators specializing in federal competition law reinforced certain sections of Elon Musk’s legal complaint aiming to prevent OpenAI from restructuring into an entirely profit-driven entity.

In a concise legal document submitted to a federal court in California, lawyers from the Federal Trade Commission and the Department of Justice’s competition division refrained from directly backing Musk’s accusations of OpenAI and Microsoft partaking in an uncompetitive “de-facto merger.” However, they did encourage the court to regard with suspicion one of the defenses made by OpenAI’s legal representatives.

Initially established as a non-profit with Musk as one of its funders, OpenAI transformed itself into a for-profit corporation governed by a non-profit board. It is now planning to detach fully from that non-profit board and transition into a public benefit corporation, shifting its fiduciary responsibility toward investors as opposed to adhering to a charitable objective.

A major driving force behind OpenAI’s expansion and its shift toward profit-making has been the over $13 billion in investment and other backing from Microsoft, a publicly-listed enterprise that contests in the AI sector. Reid Hoffman, who founded LinkedIn, served on Microsoft’s board and was part of OpenAI’s board until March 2023. A prominent Microsoft executive, Dee Templeton, held a non-voting position on OpenAI’s board from November 2023 until July 2024.

Musk has claimed that the roles of Microsoft’s representatives on the OpenAI board breached federal competition laws that forbid an individual from serving on the governing board of rival companies, a concept known as an interlocking directorate. OpenAI has countered by stating the claim is irrelevant since neither Hoffman nor Templeton remain on OpenAI’s board.

Nonetheless, FTC and DOJ attorneys stated that “simply ending an interlocking directorate, for example by having an individual step down from a board, on its own does not render a claim under Section 8 of the Clayton Act irrelevant. … The Court should avoid concluding otherwise when resolving this issue.”

The federal authorities did not comment on Musk’s various other grievances, including allegations that OpenAI CEO Sam Altman deceived him and collaborated with Microsoft to dissuade financiers from investing in Musk’s AI venture, xAI.

Although the lawsuit at times resembles a dramatic billionaire conflict, the FTC and DOJ’s submission is an indication that regulatory bodies are closely monitoring OpenAI’s restructuring strategies. The attorney general of Delaware has lodged a legal document in the case, stating she will intervene if she concludes OpenAI is breaking the law, and Meta has requested that the California attorney general’s office obstruct OpenAI’s reorganization.