AG Jennings seeks consumer protections in Character.AI bankruptcy

Attorney General Kathy Jennings today announced that Delaware has joined a coalition of state attorneys general in filing a notice in the bankruptcy proceedings of Character Technologies, Inc., the company behind the popular chatbot company Character.AI. The court filing identifies serious concerns about the company's safety and privacy practices and calls for protections for children and consumers in any sale of the company's business or assets.

"For years, Character.AI's chatbots exposed countless users - many of them children - to wildly inappropriate and dangerous content, all the while gathering up their sensitive personal data," said Attorney General Kathy Jennings. "As the company files for bankruptcy, we're going to work to ensure that this reckless conduct is reigned in and that Delawareans' private data is protected. We cannot afford to let the development of new technology come at the expense of our humanity."

Character.AI is an artificial intelligence chatbot platform that allows users to interact with AI-powered chatbot "characters" designed to mimic human conversation and relationships. These chatbot characters include fictional and celebrity personas, children's cartoon characters, and others that present themselves as psychologists, therapists, and doctors. Through chats with these characters, the company has collected sensitive consumer data, including private conversations about users' mental health, relationships, and emotional struggles.

Several states, including Delaware, began investigating Character.AI following a 2024 wrongful death lawsuit alleging that its chatbots fostered an emotionally and sexually exploitative relationship with a child, reinforced his suicidal thoughts, and contributed to his death by suicide. The states' investigation identified potential consumer protection and privacy violations.

The states' filing highlights the significant volume of sensitive consumer information held by Character.AI, including private chatbot conversations involving children and adults, and identifies privacy and safety protections that should be addressed in any sale or transfer of the company's business or assets.

Although Character.AI has recently voluntarily restricted minors' access to certain chatbot features, the states have raised concerns that these measures are not compulsory, are incomplete, and could be circumvented or reversed by a future purchaser.

Delaware and the other states intend to remain actively engaged in the bankruptcy proceedings to protect consumers and address outstanding regulatory concerns. The states have reserved their rights to challenge any proposed sale or bankruptcy plan and to seek additional protections for consumers' personal information.

Joining Attorney General Jennings on the court filing are the attorneys general of Alaska, California, Colorado, Connecticut, Idaho, Louisiana, Michigan, Mississippi, Nevada, New Jersey, New York, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, Washington, Wisconsin, and West Virginia.

A copy of the states' filing is available here.