Elon Musk’s six major conflicts of interest with the federal government

The Federal Advisory Committee Act says in plain language that an advisory committee – as Elon Musk proposes the “Department of Government Efficiency” to be – must ensure that its recommendations are not biased by any special interest.

Yet, Musk, the richest man on Earth, has a wider and deeper range of potential conflicts of interest with the federal government than perhaps any person has ever had.

Musk owns, directs or invests in a wide array of industries, touching dozens of departments and agencies of the federal government, from the Department of Transportation with Tesla, to the Department of Defense with SpaceX, to the Department of Health and Human Services with Neuralink. His companies are the subject of federal investigations and regulatory actions, including accusations of hiring discrimination, environmental damage and safety deficiencies.

Trump has dismissed concerns about Musk’s conflicts of interest, saying in his recent interview with Time Magazine: “I think that Elon puts the country long before his company.”

Tesla

The electric car company where Musk serves as CEO is worth $1.25tn today, more than every other publicly traded car company in America combined – this, despite ranking 10th in revenue and ninth in earnings among them. The stock valuation is a product of expectations: that it will eventually put other car companies out of business, that it will capture their market share, that it will evade the labor and pension costs of legacy car makers, and that it will escape deep liability for production problems with its cars.

All of those assumptions rest on how the firm is regulated, and how car companies are taxed or subsidized.

The National Highway Traffic Safety Administration has been investigating Tesla’s autopilot system since August 2021. A report released in April said the autopilot design “led to foreseeable misuse and avoidable crashes”, and attributed 13 fatal crashes to Tesla’s self-driving feature and its abuse.

Cuts made to the NHTSA staff could directly affect those investigations. More pointedly, threats of cuts to NHTSA might influence current investigations in a bid to curry favor.

Tesla has also faced legal challenges over its labor policies – it is the only American auto manufacturer unrepresented by a labor union. Tesla has interfered with workers handing out union leaflets, banned factory workers in California from wearing union T-shirts and threatened workers with the loss of stock options if they unionize, all acts that the National Labor Relations Board acted against.

Musk talked about firing striking workers in a talk on X with Donald Trump. “You’re the greatest cutter,” Trump told Musk. “I look at what you do. You walk in and say: ‘You want to quit?’ I won’t mention the name of the company but they go on strike and you say: ‘That’s OK. You’re all gone.’”

“Yeah,” Musk replied, laughing.

Under federal law, workers cannot be fired for going on strike. Threatening to do so is illegal under the National Labor Relations Act. The exchange prompted the United Auto Workers to file a complaint with the NLRB, asking it to review the exchange as illegal intimidation.

SpaceX

The market value of Musk’s SpaceX, which is privately owned, has doubled over the last year by some estimates to $350bn. Observers attribute some of those gains to Musk’s close relationship with Trump.

Musk has had additional run-ins with the NLRB through his SpaceX rocket and satellite services company. After Musk fired SpaceX employees who had been publicly critical of him, the NLRB ruled them illegal firings.

Musk’s response in January was to challenge the constitutionality of the NLRB itself in a federal lawsuit. The suit, filed by SpaceX in a Texas federal court, argues that the NLRB’s administrative law judges circumvent the right to a jury trial, and that the president should be able to remove those judges under article II, which the NLRB’s structure does not currently permit.

Consider how a recommendation by the “Department of Government Efficiency” for the president to reduce headcount at NLRB by firing judges would affect Musk’s business operations and legal environment.

Unlike appointees to the federal bench, an administrative law judge does not require confirmation and does not enjoy the same protections from being removed from office that a federal judge has.

SpaceX has received more than $15bn in federal government contracts since Musk took charge. It is seeking billions more, from Nasa for its mission to the moon, from the Department of Defense for satellite communications services, and from the Federal Communications Commission to provide rural broadband services through its Starlink subsidiary. Nasa recently turned to SpaceX to rescue two astronauts stranded after Boeing’s Starliner program could not send a ship to recover them from the International Space Station.

But SpaceX has also been the target of regulatory action by the Federal Aviation Administration (FAA) over environmental issues.

SpaceX’s response was to tell the FAA to focus on Boeing’s problems and to leave SpaceX alone. Consider how Musk’s influence over the FAA and Nasa budgets may impact future regulation of and funding for SpaceX, to the competitive disadvantage of Boeing and other aerospace firms.

X

Musk’s purchase of Twitter was arguably a product of regulation. In 2022, Musk – then the largest shareholder of Twitter – posted that he was prepared to take the company private. The comment drew a shareholder lawsuit for stock manipulation, and prompted an investigation before the Securities and Exchange Commission.

It wasn’t the first time Musk and the SEC had tangled. Musk eventually had to pay a $20m fine after tweeting his intent to take Tesla public in 2018, temporarily boosting its share price. The agency said the tweets violated securities law as “materially false and misleading”. As part of the settlement of the case, Musk agreed to have an SEC “minder” vet his social media posts to ensure they do not violate securities laws, a condition Musk has unsuccessfully petitioned the US supreme court to remove.

The SEC sought sanctions in its continuing investigation into Musk’s Twitter takeover, after Musk blew off a hearing earlier this year. Though unlikely, Musk still potentially faces a criminal charge of stock manipulation for the way he communicated about the company in public before making the purchase.

Consider how a call for cuts to the SEC might keep Musk out of jail.

Musk joked with Tucker Carlson before the election that a Trump loss might result in his imprisonment. “If he loses, I’m fucked,” he said. “I’m like, how long do you think my prison sentence is going to be, do you think? Will I see my children? I don’t know.”

X has lost billions of dollars in market value by industry estimates as advertisers and users flee the platform’s unmoderated forum. One path to profitability would be by exploiting user data. A change to its terms of service shortly after the election informed users that it would sell user data to third parties for the purposes of training artificial intelligence models.

These kinds of sales have become a focus for the Consumer Financial Protection Bureau, a government watchdog. The CFPB proposed a rule last week that would block the brokering of sensitive user data as a means of curtailing financial fraud. The rule would treat data brokers like credit bureaus and background check companies, requiring those that sell data about income or financial tier, credit information or debt payments to comply with the Fair Credit Reporting Act.

It’s not immediately clear whether X would fall under this rule. But Musk’s recent post calling for Trump to “Delete CFPB” as wasteful government spending suggests he believes it might.

xAI

For the moment, user data on X is a training tool for xAI, Musk’s artificial intelligence startup. The private firm is valued at about $50bn and is competing with, among others, Microsoft, Google and OpenAI – a non-profit Musk has backed financially.

Other than data privacy, AI faces few intrinsic regulatory considerations in the US today. But policymakers are contemplating potential rules for a technology that could harm people if misaligned with the public interest. The White House office of science and technology policy released a draft blueprint for an “AI Bill of Rights” in September 2022, which called for legislation to ensure AI would not affect civil rights or personal privacy.

Musk announced that xAI intends to build the world’s largest supercomputer in Memphis, Tennessee, and has already deployed 14 large gas generators to power the data center. The facility in South Memphis is in a predominantly Black community. Activists from the Southern Environmental Law Center have noted that xAI is operating the generators without permits, have asked for regulatory action and described the pollution as “environmental racism”.

Musk’s companies have had conflicts with the Environmental Protection Agency on multiple fronts, from emissions at Tesla factories to pollutant discharge at SpaceX launch facilities.

Consider the impact of a recommendation from the “Doge” committee to strip the EPA of staff or to eliminate pollution standards.

Neuralink

Musk’s most controversial investment has been the founding of Neuralink, a biotech startup intent on developing human brain implants to allow wireless mental control of electronic devices.

The Food and Drug Administration initially denied permission for Neuralink to perform human experiments, but relented earlier this year. The company has drawn criticism – and an investigation by the FDA and Department of Agriculture – for the manner in which animals have been killed in the firm’s research and development process.

Cryptocurrency

Musk famously named the new “Department of Government Efficiency”, or Doge, as a reference to Dogecoin, a cryptocurrency first created as a joke around an internet meme. The value of that currency has grown with Musk’s promotion of it, and spiked after the election.

But Musk, whose first billions came from his work in financial services as one of the founders of PayPal, has long been a crypto enthusiast. He has disclosed personal investment in Bitcoin, Ethereum and Dogecoin. His companies have intermittently accepted cryptocurrency as payment for services and have held cryptocurrencies in their corporate treasuries.

Cryptocurrency faces regulation. Electricity demand for Bitcoin mining has driven nomadic miners to find cheap power – and lax energy regulation – across the globe. The industry is prone to fraud.

The SEC has pursued cases against initial coin offerings, exchanges and crypto projects that it deems as unregistered securities. The Commodity Futures Trading Commission regulates cryptocurrencies as commodities – a key distinction from being regulated like stocks and bonds, which affects how crypto firms communicate. The Financial Crimes Enforcement Network looks at how cryptocurrency can be used as a tool for money laundering, evading sanctions and financing terrorism. And the IRS expects people who own cryptocurrencies to report gains and losses on their taxes.

Cuts to any of those agencies could have a direct and disproportionate effect on Musk’s personal finances.