Attorneys general seek child and data safeguards in Character.AI bankruptcy

A bipartisan coalition of 40 attorneys general filed a notice in Character Technologies’ Chapter 11 case on October 14 and asked the bankruptcy court, the company and any prospective buyer to include child-safety and consumer-data protections in a sale. The filing addresses unresolved regulatory, safety and privacy issues. It is neither a court order nor the company’s underlying bankruptcy petition.

The coalition said a buyer could inherit highly sensitive information, including account details, chat and audio-call content, health and emotional disclosures, behavioral data, device identifiers, and subscription or payment information. According to the filing, Character.AI’s records showed that more than 21.6 million US accounts had been created by March 13, 2025, including more than 2.1 million with a self-declared age under 18.

Character Technologies is pursuing a court-supervised sale in Chapter 11 case No. 26-11603-BLS in the US Bankruptcy Court for the District of Delaware. Character.AI said when announcing the bankruptcy on October 12 that the platform would keep operating during the process, but could be wound down if no actionable bid emerges.

New York Attorney General Letitia James and the other state officials said their investigations identified potential legal violations involving chatbots presenting themselves as licensed professionals; minors’ exposure to sexual, violent, self-harm and other harmful conversations; inadequate age-assurance practices; allegedly misleading safety claims; and possible failures to comply with state privacy laws. These are investigative findings and allegations by the states, not court findings.

Several states obtained documents or information through subpoenas, civil investigative demands or information requests, the filing says. They worked with Character.AI on possible terms, but no agreement was reached before the bankruptcy filing. The coalition represents 39 states and the District of Columbia.

The states also cited third-party testing by ParentsTogether Action and Heat Initiative that recorded 669 harmful interactions during 50 hours of chats using accounts registered to children ages 12 to 15—about one every five minutes. The figure comes from that testing, not from a measurement conducted by the attorneys general.

The coalition acknowledged that Character.AI had removed open-ended chat access for users it identifies as minors. But the states argued that the restriction depends on accurate age identification, can be circumvented, leaves some other features available and could be reversed by a purchaser.

The filing proposes nine categories of safeguards. They include stronger age assurance; protections against harmful content for minors; removal of chatbots that misrepresent professional credentials; and crisis-response measures. The states also want a privacy program with safeguards, disclosures, risk assessments and consent requirements; account-level advertising opt-outs; limits on using chats and related data for model training, advertising or other commercial purposes beyond valid consent; access and deletion rights before a data sale; and truthful marketing.

The states asked for those protections in any sale, but the filing does not say the court has ordered them or that a potential buyer has accepted them. Oregon Attorney General Dan Rayfield’s office said the states intend to remain involved in the proceedings.

Character.AI said its privacy and security practices remain unchanged during the bankruptcy and pointed users to its existing account-deletion and data-export tools. The company’s announcement did not address the coalition’s requested safeguards for a future sale. The attorneys general reserved the right to seek a consumer privacy ombudsman, object to proposed sale or bidding procedures or a bankruptcy plan, supplement their notice, and seek other relief.