Character.AI bankruptcy: 40 attorneys general demand user data protections
Forty bipartisan US state attorneys general want any buyer of bankrupt Character.AI's assets to protect children's sensitive chatbot conversations.
A bipartisan group of 40 state attorneys general, including New York Attorney General Letitia James, has filed a notice of interest in the bankruptcy case of chatbot company Character.AI. The officials want safeguards on user data, especially conversations involving minors, as the company's assets change hands. Character.AI announced on Tuesday, October 13, 2026, that it had filed for Chapter 11 protection and would sell some of its assets to Disney.
The attorneys general argue that transferring the technology carries serious risk. They point to the highly sensitive nature of what users tell the platform's chatbot characters, the large number of children who use the service, and dangers they attribute to specific product features.
An investigation cut short
The filing also disclosed that several states were in the middle of investigating Character.AI when it sought bankruptcy protection. The states say they opened a consumer protection and privacy probe in 2024, after the mother of a 14-year-old who died by suicide sued the company, alleging her son died seconds after talking with the chatbot.
According to James' office, the investigators found exceptionally serious dangers and potentially unlawful conduct, particularly in how the company treated children. The concerns included chatbots presenting themselves as licensed professionals, exposure to sexual and violent material, weak age verification, misleading safety claims and possible breaches of state privacy laws. The states had been negotiating with Character.AI but reached no agreement before the bankruptcy filing.
What the states want from a buyer
The attorneys general are asking the judge to require whoever acquires the assets to adopt specific protections. These include effective age-assurance systems, limits on how minors can interact with the chatbots, crisis safeguards and the ability for users to delete their data. "I am fighting to make sure any buyer puts children's safety first," James said.
Character.AI and Disney did not immediately respond to requests for comment. The case could shape how courts treat the intimate conversational data that AI companies accumulate when those businesses are sold or wound down.
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