--- title: "Texas sues OpenAI and Sam Altman as it seeks $30 billion at a $1.25 trillion pre-money valuation" description: "Ken Paxton's October 23 suit is the tenth state case against OpenAI this year, filed as investors negotiate a $1.25 trillion price for a company that has already confidentially filed to go public. With no federal AI law, state attorneys general are writing OpenAI's enforcement record themselves." publisher: "The Inference" section: "Policy & Labor" published: 2026-10-24T17:10:02.227Z modified: 2026-10-24T17:10:02.227Z canonical: https://theinference.org/article/texas-sues-openai-and-sam-altman-as-it-seeks-30-billion-at-a-1-25-trillion-pre-money-valuation language: en keywords: "OpenAI, Sam Altman, Ken Paxton, AI Regulation, Texas, ChatGPT" --- # Texas sues OpenAI and Sam Altman as it seeks $30 billion at a $1.25 trillion pre-money valuation > Ken Paxton's October 23 suit is the tenth state case against OpenAI this year, filed as investors negotiate a $1.25 trillion price for a company that has already confidentially filed to go public. With no federal AI law, state attorneys general are writing OpenAI's enforcement record themselves. ## Texas makes it ten Texas Attorney General Ken Paxton sued [OpenAI](https://theinference.org/markets/companies/openai) and chief executive [Sam Altman](https://theinference.org/markets/people/sam-altman) on October 23, 2026, alleging ChatGPT was marketed as "trustworthy, reliable, and safe" while it produced fake results, known as hallucinations, and endangered minors [1][2]. The filing lands in the closing window of a round that would value the company at $1.25 trillion [3]. [The 67-page complaint](https://www.courthousenews.com/texas-attorney-general-sues-openai-for-lying-about-chatgpt-safety-and-safeguards/), filed in Collin County District Court, rests on the Texas Deceptive Trade Practices Act and the SCOPE Act, the state's children's online safety law, and asks the court to block new ChatGPT releases in Texas until a court-appointed independent evaluator approves them [1][2]. Texas is the tenth state to sue OpenAI this year, and the second, after Florida, to name Altman personally [1][4][5]. ## The suits came in waves Florida Attorney General James Uthmeier opened the sequence on June 1 with an 83-page complaint seeking civil penalties that could reach into the billions; on September 28 his office moved to bar OpenAI from developing new models without third-party oversight [5]. Eight states filed individually on October 14: Iowa, Kansas, Nebraska, West Virginia, Arkansas, Arizona, Idaho and Montana [4]. No federal AI law exists, so each state is enforcing its own consumer-protection statute; federal lawmakers have so far failed to keep AI companies in check, Kansas Attorney General Kris Kobach said [6]. "We are not going to hold our breath" waiting for Congress, he added [6]. ## The price was set in the same weeks The filings landed inside that window. OpenAI told investors on October 22 it wants signatures by the end of next week on [a round of up to $30 billion at a $1.25 trillion pre-money valuation](https://www.msn.com/en-us/money/markets/openai-nears-up-to-30-billion-funding-round-at-125-trillion-valuation-led-by-uae-investors/ar-AA2fROpK), the price before the new cash arrives, led by United Arab Emirates investors and the investment firm Coatue [3]. That price is down from the $1.4 trillion discussed in September, a cut investors trace to doubts about AI spending rather than to the lawsuits; the last closed round, in March, raised $122 billion at an $852 billion valuation [7]. *Chart: **OpenAI's price fell $150 billion between September talks and the October target** Column chart of OpenAI's valuation: $852 billion closed in March 2026, $1.4 trillion discussed in September 2026, and a $1.25 trillion pre-money target in October 2026.* *OpenAI valuations in billions of dollars: the closed March 2026 round, the figure discussed with investors in September, and the pre-money target for the round now closing. Sources: CNBC; Proactive via Yahoo Finance. [3][7]* ## What the buyers inherit Whoever signs inherits a company defending ten state suits plus [a reported 42-state coalition investigation](https://cryptobriefing.com/eight-states-sue-openai-chatgpt-children/) [5]. The IPO prospectus went confidentially to the Securities and Exchange Commission in June, and finance chief [Sarah Friar](https://theinference.org/markets/people/sarah-friar) has told employees OpenAI "will be a public company in 2027" [3]. Ten attorneys general have now written the first draft of its risk factors. OpenAI answers that no system is perfect, points to age-specific protections including a restricted ChatGPT for Teens launched in August, and wants industry-wide rules rather than one-company suits [1][4]; a California jury also found OpenAI not liable in Musk's mid-2026 case against Altman [2]. Paxton is in a tight Senate race against Democrat James Talarico [1], and campaign finance filings show [Elon Musk](https://theinference.org/markets/people/elon-musk), Altman's chief rival, spent nearly $200 million on ads supporting Paxton [2]. ## Watch the signatures Two readings will price the risk: the round's final size, with commitments expected by the end of October [7], and [Anthropic's](https://theinference.org/article/anthropic-told-investors-it-turned-its-first-profit-as-openai-races-to-raise-30-billion) expected IPO, where a rival carrying the same questions seeks $1.5 trillion to $2 trillion after raising $65 billion at a $965 billion valuation in May [3]. The Inference last tracked this race on October 20, reporting that [Anthropic](https://theinference.org/markets/companies/anthropic) had told investors it turned its first profit [7][3]. *Chart: **OpenAI and Anthropic are each seeking a big step up from their last closed round** Column chart comparing valuations in billions of dollars: OpenAI closed March 2026 at $852 billion and targets $1.25 trillion in October 2026; Anthropic closed May 2026 at $965 billion and targets $1.5 trillion to $2 trillion in an expected IPO.* *Valuations in billions of dollars. Closed rounds are reported figures; the October OpenAI target is pre-money and Anthropic's IPO target is shown with its reported range. Sources: CNBC; Proactive via Yahoo Finance. [3][7]* ## Takeaway Ten states are now suing OpenAI over how it marketed ChatGPT just as it closes a $30 billion round at $1.25 trillion, which makes the attorneys general's complaints the working draft of the risk factors for its planned 2027 IPO. ## Sources 1. [The Hill, "Paxton sues OpenAI, Altman for failing to warn Texans about ChatGPT's dangers," 23 October 2026](https://thehill.com/policy/technology/6169375-paxton-sues-openai-chatgpt/) 2. [Courthouse News Service, Cameron Thompson, "Texas attorney general sues OpenAI for lying about ChatGPT safety and safeguards," 23 October 2026](https://www.courthousenews.com/texas-attorney-general-sues-openai-for-lying-about-chatgpt-safety-and-safeguards/) 3. [CNBC (via MSN), Kate Rooney, "OpenAI nears up to $30 billion funding round at $1.25 trillion valuation led by UAE investors," 23 October 2026](https://www.msn.com/en-us/money/markets/openai-nears-up-to-30-billion-funding-round-at-125-trillion-valuation-led-by-uae-investors/ar-AA2fROpK) 4. [CNBC, Ashley Capoot, "OpenAI sued by 8 states over ChatGPT safety concerns," 14 October 2026](https://www.cnbc.com/2026/10/14/openai-sued-by-8-states-over-chatgpt-safety-concerns-.html) 5. [Crypto Briefing, Diego Almada Lopez, "Eight US states sue OpenAI, alleging ChatGPT harms children," 14 October 2026](https://cryptobriefing.com/eight-states-sue-openai-chatgpt-children/) 6. [NBC News (via MSN), Angela Yang, "Eight states sue OpenAI over ChatGPT's alleged harms to users," 14 October 2026](https://www.msn.com/en-us/news/other/eight-states-sue-openai-over-chatgpts-alleged-harms-to-users/ar-AA2egbiB) 7. [Proactive (via Yahoo Finance), "OpenAI cuts fundraising valuation target to $1.25 trillion after investor pushback," 23 October 2026](https://finance.yahoo.com/technology/ai/articles/openai-cuts-fundraising-valuation-target-143300967.html) --- Texas sues OpenAI and Sam Altman as it seeks $30 billion at a $1.25 trillion pre-money valuation — The Inference. Canonical: https://theinference.org/article/texas-sues-openai-and-sam-altman-as-it-seeks-30-billion-at-a-1-25-trillion-pre-money-valuation