Attorneys general from 39 states and Washington, D.C., led by Colorado's Phil Weiser, filed a notice of interest and reservation of rights on Wednesday, Oct. 14, in the bankruptcy case of Character Technologies, the company behind the Character.AI chatbot app. The filing is not a lawsuit or an objection: it puts the court, the company and any buyer on notice of the issues the states say any sale must address. The company filed for bankruptcy in federal court in Delaware two days earlier, planning to license its technology to Disney and look for a buyer for its chatbot app, according to a news report. The states asked the court, the company and any would-be buyer to make sure that any sale of the app, its technology or its users' personal information comes with protections, especially for children, and that users are told what protections to expect. "Bankruptcy cannot become a way for a company to walk away from its responsibility to protect children and consumers," Weiser said.
The states' worry is what Character.AI holds about the people who use it. Its characters are built to imitate human conversation, and the states say many play best friends or romantic partners, and some pose as therapists or doctors, roles people tend to confide in. They say the company has collected private conversations about users' mental health, relationships and emotional struggles. By the company's own records, more than 21.6 million U.S. accounts had been created by March 13, 2025, and more than 2.1 million of them gave an age under 18, the filing says.
The filing lists nine things the states want any buyer to be ready to do. They include age checks that don't rely only on the birthday a user types in; keeping the limits on children's free-flowing, back-and-forth chats with characters, and shielding children from sexual and violent material in Stories, a feature where users set up scenes between characters, and in its other features beyond chat; removing characters that claim to be therapists, doctors, lawyers or other licensed professionals; not using people's chats to train AI models, or for advertising, beyond what they agreed to; and giving every user the chance to delete their data before any sale. The rest cover responding to talk of self-harm or suicide, a privacy program, ad opt-outs that work across devices, and honest marketing.
Character.AI has already stopped users it identifies as under 18 from open-ended chats with its characters. The states say that limit is voluntary, can be gotten around and could be dropped at any time, including by a buyer. Several states began investigating the company after a 2024 lawsuit that blamed its chatbots for a 14-year-old boy's death by suicide, and the states say they tried to agree on terms with Character.AI but could not before it went into bankruptcy. Only Kentucky's attorney general has sued so far, in January, the filing says, though Pennsylvania's medical board brought its own civil case in May. The states have kept the right to challenge any sale or bankruptcy plan and to seek more protections for users' personal information.
At the company's first court hearing the same day, a lawyer for the states said they are still negotiating a settlement with Character.AI, according to a news report. Character.AI's lawyer told the court that no buyer has yet made an offer for the company's user data or for the running chatbot app, the report says. Disney, which has agreed to pay $20 million to license the company's technology and other intellectual property in a deal the court must still approve and others can still outbid, is not interested in that kind of data, she said. It is not yet clear who will bid for the app and its users' chats, or whether the court will hold a buyer to any of the steps the states want.