AG Sunday Takes Action to Ensure Sensitive Consumer Information is Protected in Character.AI Bankruptcy, Potential Sale
HARRISBURG – Attorney General Dave Sunday announced that Pennsylvania is joining 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 regards sensitive consumer information — including information about children — obtained by Character.AI’s chatbot platform that must be protected in any potential sale that includes transfers of the company’s assets.
Considering a coalition of states, including Pennsylvania, have already identified security and privacy concerns related to Character.AI’s practices, it is paramount that consumer protection is prioritized throughout bankruptcy proceedings and a potential sale.
“We have seen time and time again tech companies prioritize profits over the safety of their users — many of them children — so we must continue to do everything in our power to protect those consumers,” Attorney General Sunday said. “We have already found toxic interactions and activity with this platform, and cannot assume sensitive and personal information will be handled properly.”
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.
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.
Several states, including Pennsylvania, 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.
Although Character.AI has recently voluntarily restricted minors’ access to certain chatbot features, the states have raised concerns that these measures are not compulsory, incomplete, and could be circumvented or reversed by a future purchaser.
Pennsylvania 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 Sunday on the court filing are the attorneys general of Alaska, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Idaho, Illinois, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin, and West Virginia.
A copy of the states’ filing is available here.
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