Federal antitrust regulators on Friday added weight to parts of Elon Musk’s lawsuit seeking to prevent OpenAI from transforming itself into a fully for-profit company.

In a NOTES Filed in a federal court in California, lawyers for the Federal Trade Commission and the antitrust division of the Department of Justice did not directly support Musk’s Claims that OpenAI and Microsoft colluded in an anticompetitive “de-facto merger,” but they urged the court to be skeptical about one of the defenses made by OpenAI’s legal team.

OpenAI began as a non-profit, funded in part by Musk, and then transformed itself into a for-profit company controlled by a non-profit board of directors. It is now planning to completely separate from the non-profit board and become a public benefit corporation, which allows it to be reliably responsible to investors instead of relying on a charitable mission.

A key contributor to the development of OpenAI and the pressure for it to become a profitable business is the more than $13 billion in investment and other support received from Microsoft, a publicly traded company that competes with AI market. Reid Hoffman, the founder of LinkedIn, is a member of Microsoft’s board and a member of OpenAI’s board until March 2023. A top Microsoft executive, Dee Templeton, is a non-voting member of OpenAI’s board from November 2023 to July 2024.

Musk argued that the positions of Microsoft representatives on the OpenAI board violated federal antitrust laws that prohibit a person from serving on the governing board of competing companies, known as an interlocking directorate. OpenAI responded by saying the argument was irrelevant because neither Hoffman nor Templeton were members of OpenAI’s board.

FTC and DOJ lawyers, however, wrote that “the termination of an interlocking directorate, for example, by the resignation of a person from a corporate board, is not sufficient, by itself, to debate a claim under Section 8 of the Clayton Act. … In resolving this matter, the Court must refrain from holding otherwise.”

Federal agencies have not evaluated several of Musk’s other allegations, including that OpenAI CEO Sam Altman misled him and conspired with Microsoft to convince investors not to fund Musk’s own AI startup, xAI.

While the lawsuit often carries the tone of a soap opera battle between billionaires, the filing with the FTC and DOJ is another sign that regulators are taking a close look at OpenAI’s transition plans. Delaware’s attorney general filed a brief in the case and said he would take action if he believes that OpenAI is violating the law and Meta asked the California attorney general’s office to block OpenAI’s redesign.