A bipartisan coalition of roughly 40 state attorneys general has told a Delaware bankruptcy court that Character.AI cannot use Chapter 11 to shed responsibility for alleged risks to children and the sensitive data it collected from millions of users.
Colorado Attorney General Phil Weiser led the group in filing a notice of interest and reservation of rights on October 14, 2026, in In re Character Technologies, Inc., Case No. 26-11603. Character Technologies, the company behind the Character.AI chatbot platform, filed for Chapter 11 protection two days earlier, on October 12. The company has said it intends to pursue a court-supervised sale of assets and has entered into a stalking-horse arrangement with Disney involving certain intellectual property.
In the filing, the attorneys general describe serious concerns about the platform’s safety and privacy practices. They note that investigations by multiple states, triggered in part by a 2024 wrongful-death lawsuit involving a 14-year-old Florida boy, identified potential consumer-protection and privacy violations. The suit alleged that Character.AI chatbots fostered an emotionally and sexually exploitative relationship with the child, reinforced his suicidal thoughts, and contributed to his death. Kentucky has also filed its own lawsuit alleging the platform encouraged self-harm among children.
Weiser stated that “bankruptcy cannot become a way for a company to walk away from its responsibility to protect children and consumers.” He added that Character.AI’s chatbots have raised “serious concerns about children’s safety, including exposure to sexual content, dangerous advice, and encouragement of self-harm.” New York Attorney General Letitia James warned that the company holds some of the most private thoughts children have shared and that those conversations could be sold to a new owner. Other AGs, including Connecticut’s William Tong, have described the platform’s performance as a failure on safety grounds.
The coalition is asking the court to ensure that any sale or transfer of the business or its assets includes concrete protections for children and consumers. These include effective age verification, crisis-response safeguards, limits on the use of conversation data for training or advertising, and meaningful rights for users to access and delete their data. The states have also reserved the right to challenge any proposed sale or plan that does not adequately address outstanding regulatory and safety issues, and they have raised the possibility of a consumer-privacy ombudsman to review the transfer of user information.
Character.AI has faced additional private lawsuits from families alleging that its chatbots exposed children to sexual content or encouraged suicide and self-harm. The company has reached preliminary settlements in some of those cases, though the terms remain undisclosed and the settlements have not been finalized. It has also been the subject of a multistate investigation involving dozens of attorneys general and has drawn scrutiny from the Federal Trade Commission and foreign regulators. The company has said it hopes the bankruptcy process will help resolve the outstanding claims and investigations.
The states’ filing underscores a broader point in AI enforcement: regulators are treating bankruptcy as neither a shield nor a reset. With Character.AI’s platform still operating while the sale process moves forward, the attorneys general have indicated they will stay engaged to ensure that child-safety and privacy obligations travel with the assets rather than disappear in the restructuring.