State attorneys general seek child-safety and data protections in Character.AI bankruptcy

Character.AI’s bankruptcy now faces a consumer-protection intervention: on October 14, 2026, Colorado Attorney General Phil Weiser led state attorneys general in filing a notice seeking safeguards for children and users’ private data. The coalition wants those protections addressed in any sale or transfer of Character Technologies, the company behind the chatbot platform, or its assets.

An investigation interrupted by bankruptcy

Character.AI lets people chat with AI characters designed to imitate human conversation and relationships. Its personas include fictional figures, celebrities and children’s cartoon characters, alongside bots presenting themselves as psychologists, therapists and doctors. Those interactions are at the center of the states’ concerns.

Several states began investigating after a 2024 wrongful-death lawsuit alleged that the company’s chatbots fostered an emotionally dependent and sexually exploitative relationship with a child. The lawsuit alleged that the bots reinforced his suicidal thoughts and contributed to his death by suicide. Those are allegations, not findings that the chatbot caused his death.

The investigation identified potential consumer-protection and privacy violations, according to the states. New York Attorney General Letitia James’s office described weak age checks, misleading safety claims and children’s exposure to sexual, violent and self-harm content. It said the attorneys general were working with Character.AI on remedies when the company filed for bankruptcy before an agreement was reached.

James’s office said independent testing cited in the filing recorded 669 harmful interactions over 50 hours using accounts registered to children ages 12 to 15. The examples included adult personas engaging child accounts in sexual role-play and telling them to conceal the interactions from parents.

Bankruptcy cannot become a way for a company to walk away from its responsibility to protect children and consumers.

Phil Weiser, Colorado attorney general

Voluntary restrictions may not survive a buyer

Character.AI has voluntarily restricted open-ended chats for users it identifies as under 18, the coalition said. But the states argue that the measures are incomplete, can be bypassed and do not cover minors the company fails to identify. A future owner could also reverse them because they are voluntary.

In one test described by James’s office, an account registered to a 14-year-old accessed sexual role-play and explicit weapon-building instructions simply by switching from text to voice. The coalition also flagged the platform’s “stories” feature, saying it remained available for scenarios involving sexual interactions and violence.

The bankruptcy raises a separate question about information already collected. The coalition says Character.AI holds private chats and voice calls, mental-health disclosures, ages and identifying device data. That information could pass to a new owner through bankruptcy, including conversations about users’ relationships and emotional struggles.

The conditions states want attached to a sale

The coalition is asking the bankruptcy court, Character.AI and prospective buyers to address both how the service operates and how its data can be used. Its requested protections include:

• Age verification that goes beyond users stating their age, safeguards against harmful sexual and violent content, and appropriate responses to suicidal or self-harming behavior.
• Removal of chatbots falsely claiming to be licensed professionals, including bots presenting themselves as qualified mental-health providers.
• A comprehensive privacy program, clear explanations of personal-data use and effective ways to opt out of targeted advertising.

The states also want limits on using private conversations for AI training or other commercial purposes without valid consent. They are seeking an opportunity for consumers to access and delete their information before any sale—putting a user decision ahead of a potential transfer to a buyer.

For the next stage, the attorneys general say they will remain involved in the bankruptcy and have reserved their rights to challenge a proposed sale or bankruptcy plan. James’s office said they could also seek an independent consumer privacy ombudsman. Those are options the coalition has preserved, rather than protections secured by filing the notice.