OpenAI Cuts Off Cursor After SpaceX Buyout, Citing Musk Companies' History of Contract Violations

OpenAI is walking away from a nearly four-year partnership with Cursor, the AI coding tool, because Cursor's new owner is Elon Musk.

OpenAI announced Friday, August 28, that it's winding down its contract to supply AI models to Cursor, with a shutoff date of November 12, 2026. The move comes two weeks after SpaceX closed its roughly $60 billion all-stock acquisition of Anysphere, the startup behind Cursor, on August 14, according to TradingView. SpaceX first announced the deal in June.

What OpenAI actually said

OpenAI didn't claim Cursor broke any rules. In a blog post published Friday, the company said plainly: "We are making this choice because we cannot be confident that SpaceX will use our technology within our terms of service, based on our experience with Elon Musk's companies violating contracts."

That's a guilt-by-association argument, and OpenAI owns it. The company pointed to two specific incidents. First, it said that after Musk bought Twitter in 2022, the platform (now folded into SpaceX after a February merger, per Business Insider) broke the terms of its OpenAI data contract, citing a New York Times report that Musk cut OpenAI's access to Twitter data. Second, OpenAI said Musk admitted under oath earlier this year that xAI used "distillation" techniques to train Grok off OpenAI's outputs, violating terms similar to xAI's own rules against that practice. Musk told The Verge in April it was "partly" true.

OpenAI said its custom contract with Cursor included a clause letting it cancel within a limited window after any "change of control" at the company. SpaceX's buyout triggered that clause. OpenAI said it's using the maximum notice period allowed, and that Cursor will not get access to OpenAI's upcoming Astra model at all.

Cursor pushes back

Michael Truell, Cursor's co-founder and now a SpaceX executive, responded on X the same day. "Cursor was one of the very first users of OpenAI, we've worked closely with their team for years, and we've trusted their platform to be neutral infrastructure for our business," he wrote, according to The News International. Truell said OpenAI models account for roughly 5% of Cursor's traffic and that he's actively talking with OpenAI's team to resolve the issue.

That 5% figure matters. Cursor's own website lists first-party access to OpenAI's GPT-5.6 Luna, Sol, and Terra models, alongside Anthropic, Google, and SpaceX's own Grok models, per Business Insider and The Business Times. If OpenAI really is a small slice of Cursor's usage, the practical impact on developers may be limited, whatever the symbolic weight of the breakup.

The feud behind the decision

This is the latest round in a fight that's been running since 2024, when Musk, an OpenAI cofounder and early funder, sued the company and CEO Sam Altman for $150 billion, accusing them of "stealing a charity" by abandoning OpenAI's nonprofit roots for profit. A federal jury ruled against Musk earlier this year, finding he waited too long to bring the claim, according to Business Insider. Musk says he plans to appeal.

Business Standard and The Business Times both note that during the trial, Musk's lawyers argued Altman lied, while OpenAI countered that Musk had tried to seize control of the company for himself. Neither claim was resolved by the jury's procedural ruling on the statute of limitations, so the underlying dispute over OpenAI's mission remains legally unsettled.

What's unproven here

OpenAI's decision rests on inference, not a Cursor-specific violation. The company is extrapolating from Twitter's and xAI's conduct to justify cutting off a company Musk now owns, even though Cursor itself has not been accused of breaching anything. That's a legitimate business judgment for OpenAI to make with its own technology and its own contracts. But it's important to be precise about what's proven and what isn't: Musk's admission under oath about xAI's use of distillation techniques is a matter of record from the court proceeding. The Twitter data cutoff is sourced to a New York Times report cited by OpenAI. Whether SpaceX, as Cursor's new owner, would actually misuse OpenAI's models has not been demonstrated one way or the other.

What happens next

Developers using Cursor have until November 12 to find alternatives if they rely specifically on OpenAI's models through the platform. OpenAI says it's committed to supporting that transition. Whether Truell's conversations with OpenAI produce a reversal, a modified arrangement, or nothing at all remains unresolved. Also unresolved: whether Musk's promised appeal of the $150 billion lawsuit ruling will reopen the broader legal fight over OpenAI's corporate structure, or whether this Cursor decision becomes just another data point in that appeal.