State attorneys general ask court to protect children’s data in Character.AI bankruptcy
Washington Attorney General Bob Ferguson and a bipartisan group of state attorneys general filed a notice in the Character.AI bankruptcy seeking protections for children and consumer data. The filing said some Character.AI bots impersonated fictional characters, celebrities, cartoon figures and people presenting themselves as psychologists, therapists and doctors, and warned prospective buyers that states could challenge a sale or bankruptcy plan.
AI-assisted synthesis · Based on 4 independent reports from 5 outlets · Full text read from 1 of 4 reportsHow it's made
What happened
Key facts
- Washington's attorney general said the filing was meant to warn any future buyer that the state will enforce its consumer protection laws regarding harmful AI chatbots (per nbcrightnow.com).
- The notice said some Character.AI bots adopted roles including fictional characters, celebrities, children’s cartoon figures and people presenting themselves as psychologists, therapists and doctors (per nbcrightnow.com).
- The states’ filing reserved the right to challenge a proposed sale or a bankruptcy plan and to press for more protections for consumers’ personal information (per nbcrightnow.com).
- Several states, including Washington, began investigating Character.AI after a 2024 wrongful-death lawsuit (per nbcrightnow.com).
- MLex reported that Character.AI's bankruptcy spurred U.S. states to seek consumer protections (per mlex.com, nbcrightnow.com).
The brief
State attorneys general have moved to protect children’s data as Character.AI navigates bankruptcy, filing a notice that seeks safeguards if the company or its assets are sold.
The filing, described in a news release cited by nbcrightnow.com, was lodged by a bipartisan coalition of states and aims to preserve states’ ability to press for consumer and privacy protections during any transfer of the company or its technology.
The notice singled out the risk posed by certain Character.AI chatbots that ‘‘took on the roles of fictional characters, celebrities, children’s cartoon figures and even people presenting themselves as psychologists, therapists and doctors,’’ the report said.
That language underpinned the states’ argument that children and other users may face consumer protection and privacy risks if those bots — or data associated with them — change hands in a bankruptcy sale.
Washington’s attorney general framed the filing as a warning to potential buyers. ‘‘This filing puts Character.AI and any possible purchaser on notice that Washington will enforce our state’s consumer protection laws to keep children and teens safe from such harmful AI chatbots,’’ the news release quoted the attorney general as saying.
The filing, the report added, expressly reserves the states’ right to challenge a proposed sale or a bankruptcy plan and to press for additional safeguards for consumers’ personal information.
Several state offices began scrutinising Character.AI after a 2024 wrongful-death lawsuit, the report said, prompting investigations that found possible consumer protection and privacy violations. The nbcrightnow.com article presented that sequence as background for why states are now asserting their interest in the bankruptcy proceeding.
The action has drawn public attention beyond Washington: a Colorado attorney general headline indicates Colorado also sought consumer protections in the bankruptcy, and trade and news headlines from Reuters, CNA and MLex noted U.S. states’ efforts to secure safeguards.
The reported filings and notices are procedural steps in the bankruptcy docket that preserve states’ legal options rather than outcomes that change ownership or data practices at this stage. State filings in the bankruptcy now create a formal mechanism for attorneys general to ask a court to limit transfers of data or to set conditions on a sale.
That preserves avenues for regulators to press for concrete privacy and consumer protections as the Chapter 11 or similar proceedings move forward.
Why it matters
- Children and teens in Washington are named as the specific population the filing seeks to protect, with the mechanism of harm described as Character.AI bots impersonating characters and professionals that could expose personal data or cause consumer harm.
- State attorneys general hold a documented legal mechanism—the right to challenge a proposed sale or bankruptcy plan—that can directly affect whether Character.AI’s data or assets transfer to a buyer without added privacy safeguards.
- Colorado and Washington’s public moves indicate multiple state law enforcers have a documented interest in shaping the outcome of the bankruptcy through consumer-protection claims.
What to watch next
- Whether a court accepts or rejects the states’ notice and any specific objections from the attorneys general when a proposed sale or bankruptcy plan is filed in the Character.AI case.
- Whether any proposed purchaser of Character.AI is publicly named in court filings and whether states file formal challenges to that sale.
- Whether state attorneys general, including Washington and Colorado, specify particular data-protection conditions or monitoring requirements in subsequent filings.
How it's being covered
Coverage analysisShow details5 source articles · 5 unique outlets · 4 distinct reportsCoverage mix: Too few rated· 2 CenterWhere the outlets are based: Unknown 60% · Asia 20% · Other 20%
One source is from a wire service (AP, Reuters, AFP or Bloomberg), whose reporting other outlets often republish.
How outlets' accounts compare
How we got here
Immediate backdrop: the filing follows Character.AI’s Chapter 11 bankruptcy petition in 2026, which placed the company’s assets and any proposed sale under federal bankruptcy supervision (U.S. Bankruptcy Code, 1978). Structural roots: U.S. federal bankruptcy law (Bankruptcy Reform Act creating the modern U.S.
Bankruptcy Code, 1978) governs how debtor assets and data can be sold, while the Children’s Online Privacy Protection Act (COPPA, 1998) and state consumer-protection statutes give regulators authority to restrict uses of children’s personal information.
Original sources
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