Arguably OpenAI's moat is the heavily subsidized Microsoft Azure infrastructure to train its models and serve traffic, but your point still stands: government regulation will be a more reliable moat. Especially as the latest LLM models (e.g. LLaMA) are shrinking in size while maintaining performance parity.

I wonder if government will end up enacting any legislation or this scrutiny will blow over until something egregious happens (e.g. Cambridge Analytica). They've shown zero willingness to legislate any consumer data privacy laws so far.