When Elon Musk established his artificial intelligence startup xAI in 2023, he registered it as a Public Benefit Corporation (PBC) in Nevada, formally committing to generate positive social impact and regularly disclose progress on non-financial objectives.

Before launching xAI, Musk had parted ways with OpenAI. Eight years earlier, Musk helped create OpenAI when it was still a non-profit organization, before the AI laboratory later received billions of dollars in funding from Microsoft as it evolved into a massive enterprise.

Musk's dispute with OpenAI escalated into legal proceedings early last year, when he sued the AI startup and its CEO Sam Altman for breach of contract, claiming they abandoned the company's founding mission to develop AI "for the broad benefit of humanity." As part of the lawsuit, Musk attempted to prevent OpenAI from transforming into a for-profit entity.

Meanwhile, according to Nevada Secretary of State records, xAI changed its own structure and terminated its PBC status.

Nevada public records show that as of May 9, 2024, xAI's qualification as a PBC no longer existed. Earlier this year, when xAI merged with X (formerly Twitter), the merged company remained without PBC structure according to its March 28 articles of incorporation.

One month after abandoning its PBC status, xAI began using dozens of natural gas turbines to power its data center in Memphis, Tennessee, where the company trains and processes data behind the Grok chatbot. While xAI and its supplier Solaris Energy Infrastructure initially promised to use pollution controls on the turbines, these measures have not yet been implemented.

Research by scientists at the University of Tennessee, Knoxville indicates that the company's Memphis operations have exacerbated air pollution problems in the region.

The NAACP has sued xAI, alleging the company violated the Clean Air Act.

Executives from the Legal Advocacy for Science, Safety & Technology (LASST), which first obtained the Nevada public records, stated that xAI appeared to register as a PBC when it was helpful for publicity but later abandoned this distinction without informing the public.

LASST CEO Taylor Whitmer said his non-profit organization is dedicated to holding AI companies accountable for promises they make to users, investors, and regulators, and pushing them to be transparent about safety risks related to AI technology and policy.

Over the past year, xAI has faced controversy not only for its environmental impact but also for the output of its Grok chatbot.

Grok functions both as a standalone application and as an integrated infotainment system application with X and Tesla Motors.

This year, Grok has generated and spread hateful and false content on X, including anti-Semitic posts, praise for Hitler, and false claims about alleged "white genocide" in South Africa. Grok has also propagated climate change denial views.

On July 9, Musk's company released a new version of its chatbot, Grok 4, but provided no details about relevant guardrails or safety testing before the launch.

Competitors including OpenAI, Google DeepMind, and Delaware PBC company Anthropic have published their safety testing information and the guardrails they establish around new versions before launch. However, companies across the industry face criticism for insufficient attention to AI safety, privacy, and the environmental impact of data centers used to train and operate AI models.

Michael Barzuza, a University of Virginia law professor and corporate law and governance expert, noted that a company focused on stakeholder accountability would not choose to incorporate in Nevada, as Nevada law makes it difficult for shareholders to sue companies, directors, and executives.

Barzuza explained this means "fewer lawsuits, but also less accountability, or even no accountability at all."

Under Nevada regulations, PBCs should submit annual reports on xAI's environmental and social impact.

Musk's abandonment of PBC status has been highly secretive, with even his lawyers seemingly unaware of the change. As recently as May 2025, Musk's attorney Marc Toberoff wrote in an amended complaint that xAI was "a public benefit corporation founded by Musk to help accelerate scientific research through artificial intelligence." The filing was part of the OpenAI case.

The document stated that Musk sued OpenAI partly to "ensure competition in the generative AI market remains healthy and that AI development proceeds safely and responsibly for all stakeholders and society as a whole."

Also in May, OpenAI yielded to pressure from civic leaders and former employees, announcing in a blog post that its non-profit organization would retain control over the company even if it restructures as a PBC.

Public disclosure by large AI model companies is becoming increasingly important as their applications penetrate consumer and commercial markets, and investors pour more money into the sector.