Attorney General Davenport Seeks Consumer Protections in Character.AI Bankruptcy

The court filing identifies serious concerns about the company’s safety and privacy practices and calls for protections for children and consumers in any sale of the company’s business or assets. 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. Several states, including New Jersey, 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.

“Given the serious safety risks associated with Character.AI, New Jersey is joining a bipartisan coalition of attorneys general working to ensure that these bankruptcy proceedings prioritize the protection of consumers, and especially children,” said Attorney General Davenport. “Character.AI’s chatbots have amassed vast amounts of deeply personal and sensitive conversations. That information must not be treated as a commodity to be sold to the highest bidder without meaningful safeguards.” “Protecting the online privacy of New Jersey residents, particularly our children, is a responsibility we take seriously,” said Christopher Peterson, Acting Director of the Division of Consumer Affairs.

“Character.AI has taken steps to mitigate the potential harms associated with its product. We want to ensure those safeguards are not compromised by the bankruptcy process and that any entity acquiring this data has robust safety and privacy protections in place.” 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. Although Character.AI has recently voluntarily restricted minors’ access to certain chatbot features, the states have raised concerns that these measures are not compulsory, are incomplete, and could be circumvented or reversed by a future purchaser.

New Jersey 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 Davenport on the court filing are the attorneys general of Alaska, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin, and West Virginia.