Current Issue

VOLUME 6, ISSUE 1

Published February, 1 2025

Articles

BALANCING MISSION AND MARKET: OPENAI’S STRUGGLE WITH PROFIT VS. PURPOSE

Cheng-chi (Kirin) Chang & Yilin (Jenny) Lu

This article examines OpenAI’s unique organizational structure, which
juxtaposes its non-profit mission with for-profit business practices, and the legal and ethical implications arising from this hybrid model. Initially established under Section 501(c)(3) of the Internal Revenue Code to advance artificial general intelligence (AGI) for the collective benefit of humanity, OpenAI has increasingly integrated commercial interests, leading to the creation of a for- profit subsidiary, OpenAI LP. This evolution has sparked scrutiny regarding the alignment of OpenAI’s activities with its original charitable objectives.

The article is structured in three parts. Part I outlines the legal framework governing 501(c)(3) organizations, emphasizing the conditions under which they may establish for-profit subsidiaries while maintaining tax-exempt status. Part II explores the shifts in OpenAI’s mission statements, the consolidation of CEO Sam Altman’s influence, and the deepening relationship with Microsoft, which has invested heavily in OpenAI and gained significant strategic influence. This section also addresses the controversies surrounding increased secrecy in OpenAI’s operations, particularly concerning AGI safety and ethical considerations. Part III discusses the potential ramifications of OpenAI losing its non-profit status, including the legal requirements for distributing its charitable assets and the precedent set by the conversion of charitable healthcare organizations into for-profit entities. Part IV explores future implications and recommendations, proposing innovative governance structures, tailored regulatory approaches, and global frameworks for overseeing AGI development.

By analyzing OpenAI’s trajectory, this article contributes to the broader discourse on the governance of non-profit entities engaged in high-stakes technological development. It underscores the importance of balancing innovation with ethical responsibilities, ensuring that the pursuit of AGI does not compromise the foundational mission of benefiting humanity. The article concludes by emphasizing the need for comprehensive legal, ethical, and governance frameworks to address the unique challenges posed by organizations operating at the intersection of cutting-edge AI technology and public benefit.

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THE UNREASONABLE RULE OF REASON

David D. Schein

Over the last twenty-five years, the United States has experienced a consolidation of major companies that have raised social and legal concerns about a movement toward monopolies in multiple industries. This paper first examines the economic background for encouraging competition and avoiding monopolies, including analyzing the Sherman Act, Clayton Act, and Hart-Scott-Rodino Act. Part II reviews federal appeals court decisions that have permitted consolidations in many cases and prevented them in a few instances. A key focus will be on the Exxon-Mobile merger approved in the late 1990s, the American Express case in 2018, and the pending Google cases. Then, Part III reviews recent mega-mergers, including Aetna-CVS and T-Mobile-Sprint, and examine several pending mergers, including Microsoft’s acquisition of Activision and Merck’s acquisition of Prometheus Biosciences. Finally, Part IV presents a possible approach to guide court decisions in the future.

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THIS IS HOWEY DO IT: RETHINKING THE SECURITY

Venkat Iyer

One of the most novel and hotly debated questions in the nascent Web3 space is ‘what exactly is a token, and how should it be regulated?’ The truth is, there is not any clear answer. Despite attempts to adapt to an ongoing flood of innovation, the Securities Exchange Commission has not given any clear guidance. Moreover, the available case law fails to provide any clear indication of how to proceed. This paper offers a framework to converge historical thinking about securities — traditionally regulated investment products — and cryptocurrencies — products that do not attach to value in a traditional way, but nevertheless resemble securities through components of price appreciation and tradability. Within the framework, this paper argues that statutory aid would both satisfy innovators and guide regulators by elucidating exactly what a token is and how it should be regulated.

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TOO LITTLE, TOO LATE: SHORTCOMINGS OF MODERN FRAUDULENT TRANSFER LAW

Alex S. Occhionero

Fraudulent transfer law seeks to undo transactions that actually or constructively defraud creditors. When used in bankruptcy, however, this mechanism comes too late in the process to prevent the real harm from taking place. As the market for financing poorly rated companies has expanded, creditors have, sometimes in anticipation of future insolvency, utilized new, super-priority liens to jump the line of existing creditors at their expense. These financiers, positioning themselves in the ranks of secured creditors increasingly sooner in the journey towards bankruptcy, exploit the need for future financing in exchange for control of the bankruptcy, suggesting that stronger tools should be made available to trustees and debtors in possession to prevent fraudulent actions before they are ingrained in the bankruptcy process. This paper will explore the emerging opportunities for debtor-in-possession financing and the ways creative creditors take over this process while suggesting that these seemingly modern leveraged buyouts can and should be avoided by greater oversight prior to bankruptcy to best maximize corporate value, in and out of bankruptcy.

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TTHE GREEN TURN OF CORPORATE LAW

Maria Eduarda Lessa

Regulators and governments are often associated with a secondary role in the dynamics of environmental, social, and governance (ESG), whose intervention should simply facilitate and support investors’ initiatives. However, this diagnosis has changed in light of recent developments across the world. Over the past five years, regulators have assumed a more prominent role in proposing and introducing mandatory legal rules–instead of soft law standards–addressing corporate sustainability and climate change across jurisdictions. This article identifies the contours and key players of the green turn and provides a comprehensive analysis of the main developments in Brazil, Germany, India, the United Kingdom, and the United States. The green turn evidences the fading boundaries between private ordering and public regulation regarding environmental risks. While the early stages of the ESG movement may have brought about notable progress in integrating environmental risks into investment decisions, the green turn is a fundamental step towards effective climate governance strategies.

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Commentary

No commentary in Volume 6, Issue 1.