State attorneys general from 40 jurisdictions filed a notice of interest in Character.AI’s bankruptcy proceeding following the company’s Chapter 11 filing and announced asset sale to Disney. The filing came from New York Attorney General Letitia James and her counterparts across multiple states, all operating on a bipartisan basis.
The states indicated they had been conducting investigations into Character.AI since 2024, prompted initially by a lawsuit involving a 14-year-old. According to the attorneys general, their probes revealed concerns related to consumer protection and privacy, particularly regarding the platform’s treatment of minors. The investigations reportedly identified issues including chatbots misrepresenting themselves as licensed professionals, insufficient age verification mechanisms, exposure to inappropriate content, and claims by the company regarding safety that the states viewed as potentially misleading.
In their filing, the state officials emphasized the sensitive nature of user conversations maintained by the platform and flagged risks associated with transferring the company’s assets and technology. They argued that the highly personal exchanges many users engaged in with the chatbots, combined with the significant youth user base, created substantial regulatory concerns. The states said they had been attempting to reach agreements with Character.AI to address these issues before the bankruptcy announcement.
The attorneys general are urging the bankruptcy judge to impose conditions on any asset transfer, requiring the acquiring company to implement safeguards including robust age-verification systems, restrictions on minor users’ interactions with chatbots, crisis response procedures, and mechanisms allowing users to request deletion of their data. James stated that the company had collected deeply personal information from children and expressed concern about the information potentially being sold without appropriate protective measures in place.
Article Attribution | Read More at Article Source
Article summary produced by Claude AI