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Company’s chatbots pose as therapists and fictional characters, and have allowed it to gather intimate and sensitive data about children, attorneys general warn
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Character.AI, a controversial service that lets people chat with artificial intelligence systems, has gone bankrupt – and experts are sounding the alarm about what might happen next.
As its name suggests, the website allowed users to chat with “characters” such as celebrity personas, fictional characters and even systems labeled as therapists. It received sustained criticism from users who have argued that it is damaging to the mental health of the young people who use it.
This week, Character.AI announced that it was filing for bankruptcy and that it would sell some of its assets to Disney. It said that it had tried to “sustain and improve our business amid significant legal, regulatory, and operational headwinds”, but that it had failed to do so, and would look to sell itself.
In its announcement, Character.AI said that it would keep running as usual and that the data its users had given to those characters would remain protected by its privacy policy. But 40 attorneys general in the US have filed a legal document that warns that very sensitive data could be at risk from that sale process.
It points to the “highly sensitive nature of the conversations many users have with Character.AI chatbot characters, the large number of minors who use the product, the serious risks posed by specific features of the product” in arguing that the sale should be scrutinised to ensure that data is protected. Because the chatbots characters are built to “mimic human interaction” and “create emotional bonds”, users will “divulge their most private thoughts and emotions” to them and that data has been collected by the company.
The same filings also reveals that many of the states that are now pursuing the action had already been investigating the company. That investigation opened in 2024, after a civil lawsuit connected a child’s suicide with him having fallen in love with one of the company’s Game of Thrones-themed characters.
That investigation found “exceptionally serious dangers and potentially unlawful conduct from Character.AI, particularly its treatment of children”, the attorneys general say. Those dangers include “chatbots posing as licensed professionals, exposure to sexual and violent content, weak age checks, misleading safety claims, and potential violations of state privacy laws”, according to a press release from the office of Letitia James, the New York attorney general.
“Parents should never have to worry that the chatbot their child is talking to is pretending to be a therapist, pulling them into sexual conversations, encouraging violence, or telling them to hide it all from their family,” Ms James said in a staement. “On Character.AI, that is what children faced.
“This company collected some of the most private thoughts children have ever shared, and now those conversations could be sold off to the highest bidder. I am fighting to make sure any buyer puts children’s safety first and puts real protections in place.”
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