40 attorneys general set nine conditions for sale of Character.ai and its user chats
Forty state attorneys general filed a notice in Character.ai’s Chapter 11 case to require nine regulatory conditions on any sale of the company or its user data. The filing warns the coalition may object in court and highlights that the company’s records show more than 2.1 million U.S. accounts declared an age under 18.
AI-assisted synthesis · Based on 4 outlets' reporting · Full text read from 2 of 4 outletsHow it's made
What happened
Key facts
- The filing is titled "Notice of Interest and Reservation of Rights by the Coalition of the State Attorneys General Regarding the Debtor's Outstanding Regulatory, Safety, and Privacy Issues." (per ppc.land, The Verge).
- Character.ai’s records cited by the states say that by March 13, 2025 more than 21.6 million U.S. user accounts had been created, including more than 2.1 million accounts with a declared age under 18 (per ppc.land).
- Character.ai proposed a bidding calendar with a bid deadline on November 20, an auction on November 23 and a sale hearing on November 24, and a Disney outside date on December 17, as reported in filings referenced by PPC Land (per ppc.land).
- New York Attorney General Letitia James is named among the 40 attorneys general in the filing (per The Verge).
The brief
Forty state attorneys general have moved to shape the outcome of Character.ai’s Chapter 11 sale by filing a formal notice in the Delaware bankruptcy court that sets nine regulatory conditions any bidder must satisfy.
The coalition framed its filing as a reservation of rights and a warning that it may object if the buyer or the sale process fails to address the states’ privacy, safety and consumer-protection concerns.
The notice is filed under the caption "Notice of Interest and Reservation of Rights by the Coalition of the State Attorneys General Regarding the Debtor's Outstanding Regulatory, Safety, and Privacy Issues." The filing’s certificate of service says the notice was served through the court’s electronic filing system on parties requesting notice on Oct. 14, 2026.
The attorneys general asked the court and parties to account for regulatory risks around user data when considering bids and transfers.
The coalition highlighted evidence from Character.ai’s own records that by March 13, 2025 the company had logged more than 21.6 million U.S. accounts and that over 2.1 million accounts declared an age under 18, and it said those figures indicate many minors used the site without robust age verification between 2022 and 2025.
The notice raises particular concern that under-18 data may have been misclassified as adult data and that any purchaser could inherit unresolved privacy and safety obligations.
The filing arrived as Character.ai outlined a sale timetable in its bankruptcy filings that includes a bid deadline on November 20, an auction on November 23 and a sale hearing on November 24, with a Disney outside date of December 17, according to the court filings PPC Land cited.
New York Attorney General Letitia James is listed among the attorneys general in the notice; The Verge reports the multistate probe began in 2024 after a lawsuit tied to a 14-year-old’s death and that the states had been investigating consumer-protection and privacy issues for years before the bankruptcy.
The attorneys general did not itself propose a specific buyer but signalled it will press the court to treat regulatory and safety obligations as enforceable considerations in the sale process.
The filing raises the prospect that the bankruptcy judge will need to weigh commercial bidding procedures alongside state-identified legal and child-protection risks before approving any transfer of Character.ai’s assets or user chat histories.
Why it matters
- Minors who used Character.ai: the coalition says more than 2.1 million U.S. accounts declared an age under 18, and the states warn those accounts may have been misclassified as adult data and therefore exposed to a purchaser’s access.
- Potential buyers and bidders: the nine conditions could constrain which companies can acquire Character.ai assets and user chats by imposing regulatory, safety and privacy obligations that bidders must accept in court filings or sale agreements.
- State enforcement power: 40 attorneys general, including New York Attorney General Letitia James, are using bankruptcy filings to assert consumer-protection and privacy concerns, signalling they will use legal process to seek enforceable safeguards rather than rely solely on post-sale assurances.
What to watch next
- Whether the Delaware bankruptcy court schedules and adjudicates objections to the sale process raised by the coalition after the bid deadline on November 20, as stated in the sale calendar cited in the filings.
- Whether any bidder for Character.ai incorporates the attorneys general’s nine conditions into a stalking-horse or final purchase agreement submitted before the auction on November 23.
- Whether the coalition files a formal objection at the sale hearing on November 24 challenging approval of a sale that does not address the states’ regulatory, safety and privacy demands.
- Whether Disney or another bidder invokes the December 17 outside date in its term sheet while negotiating terms that respond to the attorneys general’s documented concerns.
How it's being covered
Coverage analysisShow details4 source articles · 4 unique outletsCoverage mix: Too few rated· 2 CenterWhere the outlets are based: US/Canada 50% · Unknown 50%
How outlets' accounts compare
3 framing differences · 3 uncorroborated claims · 4 information gaps- PPC Land emphasizes specific numbers from Character.ai’s records and frames the filing as a broad regulatory challenge tied to a detailed bidding calendar; The Verge frames the filing primarily as a consumer-protection move led by a bipartisan group of attorneys general including Letitia James and highlights the multistate probe that began in 2024.
- PPC Land reports more than 21.6 million U.S. accounts and more than 2.1 million U.S. accounts declaring an age under 18; The Verge references the 2.1 million figure but does not restate the 21.6 million total in its excerpt.
- PPC Land attributes user-account totals and the March 13, 2025 account-date to Character.ai’s own records as cited in the Kentucky complaint; The Verge attributes the initiation of the multistate probe and the filing to Letitia James and the group of 40 attorneys general.
- The Verge reports the multistate probe began in 2024 after a lawsuit from the parent of a 14-year-old who died by suicide following interaction with a chatbot; PPC Land documents the states’ concerns about minors' data but does not detail the 2024 lawsuit as the probe’s trigger in its key facts excerpt.
- "Notice of Interest and Reservation of Rights by the Coalition of the State Attorneys General Regarding the Debtor's Outstanding Regulatory, Safety, and Privacy Issues." (title of the filing cited by PPC Land)
- The Verge reports the states filed to "put all parties on notice of the regulatory issues that will need to be addressed in any sale or transfer of the Debtor’s business or assets."
- No report Updat3 read includes the text of the nine conditions the attorneys general seek.
- No source here provides the full complaint or evidence from the 2024 multistate probe beyond The Verge's summary linking it to a lawsuit by a parent.
- No report Updat3 read provides independent verification of the age distribution or the methods Character.ai used for age verification beyond the numbers cited from the company’s records.
- The precise contents of the nine conditions are not published in the sources provided, so the specific legal or contractual remedies the states seek remain unspecified in this pack.
How we got here
Immediate backdrop: In 2026 Character.ai filed for Chapter 11 bankruptcy, initiating a court-supervised sale process for its assets under the U.S. Bankruptcy Code. Structural roots: the current U.S. bankruptcy framework was established by the Bankruptcy Reform Act of 1978 (Pub. L. 95–598), which governs asset sales under Section 363 and debtor-in-possession procedures.
Parallel regulatory frameworks include the Children’s Online Privacy Protection Act (COPPA) of 1998 and the Federal Trade Commission’s COPPA Rule (1999), which govern collection of children’s data, and the California Consumer Privacy Act (CCPA) of 2018 (effective 2020), which expanded state consumer-data protections.
Original sources
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