A coalition of state attorneys general has reportedly launched an investigation into OpenAI, adding another layer of legal and political scrutiny just as the ChatGPT maker moves toward a public listing.
According to The Wall Street Journal, the company received a subpoena on Friday from the office of New York Attorney General Letitia James. The subpoena reportedly seeks documents on a wide range of issues, including advertising practices, user engagement and retention strategies, model behavior such as “sycophancy,” handling of consumer and health data, and protections for minors and older users.
OpenAI has not publicly confirmed the details of the request, but a company spokesperson told the Journal that it is cooperating with the inquiry.
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“AI is a new and powerful technology, and we work every day to safely bring its benefits to people in a responsible way,” the spokesperson said. “We take the concerns raised by state attorneys general seriously and intend to engage constructively with their offices.”
The company also said that ChatGPT now includes stronger safeguards for minors and people in crisis, including prompts directing users toward real-world support resources and trusted human contacts.
The reported investigation comes as OpenAI confidentially filed this week for an initial public offering, positioning itself for what could become one of the largest technology listings in history. Investors have valued OpenAI at roughly $852 billion in private markets, but that valuation increasingly depends not only on growth expectations, but also on how regulators and courts ultimately treat the company’s business practices.
U.S. state attorneys general are now emerging as some of the most active enforcers in the AI sector, especially on consumer protection issues.
Unlike federal agencies, state AGs often move quickly and can coordinate across multiple jurisdictions. Their investigations can lead to lawsuits, settlements, fines, or binding changes to company practices. The coalition’s focus on minors, seniors, data handling, and persuasive AI behavior has been interpreted to mean that regulators are treating conversational AI systems less like experimental software and more like consumer products with real-world psychological and societal effects.
The inclusion of “sycophancy” in the subpoena denotes growing concern about AI capabilities. Researchers have warned that advanced chatbots can become overly agreeable, emotionally manipulative, or reinforcing of harmful beliefs if optimized too aggressively for user satisfaction. Regulators may be probing whether OpenAI’s design choices create consumer risks, especially for vulnerable users.
The reported probe is only the latest in a growing list of legal headaches for the company. OpenAI recently defeated a high-profile lawsuit brought by co-founder Elon Musk, who accused the company of abandoning its original nonprofit mission. Musk’s legal team has said it plans to appeal.
The company also faces ongoing lawsuits over alleged copyright infringement, privacy concerns, and claims involving user harm. Earlier this month, James Uthmeier sued OpenAI and CEO Sam Altman, alleging that the company ignored safety warnings and exposed children to dangerous products.
OpenAI has also faced criticism over its handling of crises. Altman recently apologized publicly after a mass shooting in Tumbler Ridge, Canada, acknowledging that the company failed to notify law enforcement after flagging and banning the suspected shooter’s ChatGPT account.
Why This Matters for Investors
For potential IPO investors, the investigation underscores a key tension surrounding frontier AI companies: the faster these systems become integrated into everyday life, the more they resemble heavily regulated consumer technologies rather than lightly governed software platforms.
Industry analysts have noted that it could create risks in four key areas:
- Compliance costs could rise sharply: OpenAI may need to expand age verification, content moderation, data governance, and mental-health safeguards.
- Growth strategies could face limits: Regulators may scrutinize engagement tactics that encourage prolonged use or emotional attachment to chatbots.
- Liability exposure could expand: Courts and regulators are still defining how responsibility should work when AI systems influence user behavior.
- Public-market investors may demand clearer governance: Questions around safety oversight, transparency, and accountability could become central to OpenAI’s IPO roadshow.
At the same time, OpenAI remains one of the most commercially successful AI companies in the world, with enterprise adoption growing rapidly and major partnerships across cloud computing and software. The investigation does not imply wrongdoing, and subpoenas are often used to gather information before any decision about enforcement action is made.
However, the subpoena arriving as AI companies race toward trillion-dollar valuations and blockbuster public listings means that regulators are signaling that commercial success will not exempt the companies from scrutiny over consumer protection, safety, and data practices.