Attorney General Dan Rayfield took legal action today to protect consumers in the bankruptcy proceedings of Character Technologies, Inc., the company behind the popular chatbot company Character.AI. Oregon and a bipartisan coalition of states have filed a notice identifying serious concerns about the company’s safety and privacy practices and calling for protections for children and consumers in any sale of the company’s business or assets.
“The underlying facts of this case are every parent’s worst nightmare,” said Attorney General Rayfield. “We’re taking action to make sure that Character.AI remains accountable for its failure to protect kids and safeguard private information – and that the bankruptcy process is not used to sell off this highly personal information to the highest bidder.”
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 Oregon, 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.
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, AG Rayfield has raised concerns that these measures are voluntary, incomplete, and could be circumvented or reversed by a future purchaser.
AG Rayfield intends 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 Rayfield in 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 Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin, and West Virginia.
A copy of the states’ filing is available here.
