From BigGo Finance · BigGo Finance · · 1m 50s
40 State AGs Demand Child Data Protections in Character.AI Bankruptcy
40 state attorneys general push for child data safeguards as Character.AI files for bankruptcy.
In brief
40 state attorneys general push for child data safeguards as Character.AI files for bankruptcy. 40 state attorneys general require buyers of Character.AI to implement child data protections during bankruptcy sales. Originally reported by BigGo Finance.
40 State AGs Push Bankruptcy Court
A coalition of 40 state attorneys general urges Delaware bankruptcy judge to require safeguards on children's chat data during Character.AI's Chapter 11 sale process.
“this company has collected some of the most private thoughts children have ever shared, and now those conversations could be sold off to the highest bidder”
New York AG Leads Coalition
New York Attorney General Letitia James demands any buyer implement age-assurance systems, restrict minor access, establish crisis safeguards, and allow data deletion.
“i am fighting to make sure any buyer puts children's safety first and puts real protections in place”
Character.AI Files Bankruptcy
Character.AI filed for Chapter 11 citing monthly losses of $8 million to $9 million and a $20 million Disney licensing deal.
“character ai filed for chapter 11 protection late monday”
No Buyer for User Data
Character.AI's attorney states no buyer has yet bid on user data or the chatbot business despite Disney's $20 million license deal.
“no bidder has yet made an offer for its user data or the operating chatbot business”
States' Legal Concerns
States allege chatbots impersonated licensed medical professionals and exposed children to sexualized and abusive interactions.
“the investigations uncovered exceptionally serious dangers and potentially unlawful conduct from character ai particularly its treatment of children”
Disney Deal Details
Disney's $20 million transaction covers non-exclusive perpetual license to intellectual property and hiring most Character.AI staff.
“disney's proposed twenty million dollar transaction covers only a non-exclusive perpetual license to certain intellectual property”
Sale Timeline
Character.AI expects sale completion by late November or early December 2026 with the service continuing during bankruptcy proceedings.
“character ai expects the sale process to conclude by late november or early december”
Child Safety Concerns
States warn chatbot interactions could lead to child harm including suicide after a 14-year-old died allegedly seconds after interacting with a chatbot.
“the mother of a fourteen-year-old who died by suicide allegedly seconds after interacting with a chatbot”
Bankruptcy Court Hearing
Abigail Ryan, representing states, told judge Brendan Shannon negotiations remain active but wants data protections for any buyer.
“we're willing to work with the buyers to find safeguards but we don't want to see what has transpired in the past start over with a new purchaser”
Company's Financial State
Character.AI reported monthly cash burn of $8 million to $9 million before bankruptcy filing with employee attrition concerns.
“character ai was losing between eight million and nine million dollars per month before seeking chapter 11 protection”
Disney's New Role
Disney hired Character.AI's former CEO Karan Deep Anand as chief technology officer effective October 2, 2.026.
“on september 18 2026 disney announced it had hired character ai's former ceo karan deep anand as its newly created chief technology officer”
The main idea
40 state attorneys general require buyers of Character.AI to implement child data protections during bankruptcy sales.
