Character Technologies, which operates Character.AI, filed for bankruptcy without first reaching an agreement with the state attorneys general investigating it. On 14 October, New York Attorney General Letitia James and 39 others - a coalition of 40 including the District of Columbia - filed asking the bankruptcy court, the company and any buyer to attach conditions to the sale.
The asset at the centre of it is data. Private chats and voice calls, mental health disclosures, user ages and identifying device data could all transfer to a new owner through the bankruptcy. The coalition is asking for age verification that goes beyond self-disclosure, safeguards against harmful content, appropriate responses when a user discloses self-harm, removal of chatbots that falsely present as licensed professionals, a comprehensive privacy programme, effective opt-outs from targeted advertising, limits on using private conversations for AI training without valid consent, and the right for users to access and delete their information before any sale completes. It reserves the right to seek an independent consumer privacy ombudsman or to object to the sale procedures outright.
James: I am fighting to make sure any buyer puts children's safety first and puts real protections in place. The investigation began after a 2024 wrongful death lawsuit. Coming six days after eight states sued OpenAI and the FTC issued civil investigative demands to OpenAI and Anthropic, the pattern is now hard to miss: state attorneys general are moving on AI consumer protection faster than federal regulators, and bankruptcy court is simply the venue that happened to be available here.
This report concerns legal filings that reference self-harm and mental health. If any of it affects you personally, support is available through a local crisis line.