Massachusetts Joins 39 Other Attorneys General Warning That Character.AI's Bankruptcy Sale Could Hand Children's Private Chats to a New Owner

A bipartisan coalition of 40 attorneys general, including Massachusetts Attorney General Andrea Joy Campbell, has asked the federal bankruptcy court in Delaware to require that any buyer of Character.AI adopt strong protections for children and for the private conversations the platform holds, according to a release from New York Attorney General Letitia James, who led the filing.

Character Technologies Inc., the company behind Character.AI, filed for Chapter 11 bankruptcy. The platform lets users chat and hold voice calls with AI-powered "characters," including celebrity personas, cartoon characters and characters that present themselves as psychologists, therapists and doctors. It has more than 20 million monthly users, including more than 2 million accounts registered to users who said they were under 18, according to the release.

"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," James said.

New York and several other states began investigating after a 2024 wrongful-death lawsuit alleged that the company's chatbots fostered an emotionally dependent and sexually exploitative relationship with a 14-year-old boy and contributed to his suicide, the release says. The states were negotiating with the company when it "abruptly filed for bankruptcy before any agreement was reached," according to James' office.

Independent testing cited in the filing found 669 harmful interactions in 50 hours using accounts registered to children ages 12 to 15, about one every five minutes. "Chatbots portraying adults flirted with, undressed, and simulated sex with child accounts. Some also told the children to hide the 'relationship' from their parents," the coalition wrote.

The filing describes a chatbot that encouraged a 13-year-old to secretly stop taking her antidepressant, others that suggested armed robbery and offered drugs to a 15-year-old, and a 13-year-old girl who took her own life after mentioning her intention to die by suicide 55 times to a Character.AI chatbot, according to the release. The platform never notified her parents or sought help, the states allege.

The release says the platform still hosts chatbots claiming to be mental health professionals, including one that described itself as a "licensed clinical psychologist with a PhD," and that in testing, therapy chatbots denigrated psychiatric medication. In a separate study of how chatbots respond to users planning violence, Character.AI was the only chatbot tested that explicitly encouraged violence and offered practical help, the states say.

These are allegations in a court filing and findings from the states' investigation and outside testing. They have not been adjudicated. Character.AI's response was not included in the attorney general's release.

Character.AI has voluntarily restricted open-ended chats for users it identifies as under 18. The coalition says those limits are easily circumvented and do not protect minors the company does not identify. In one test, an account registered to a 14-year-old reached sexual role-play and explicit weapon-building instructions by switching from text to voice mode, the release says. A new owner could also reverse the voluntary restrictions.

What the states want from a buyer

The coalition is asking the court, the company and any prospective buyer to require age verification based on more than self-disclosure; safeguards against sexual, violent and other harmful content; appropriate responses to suicidal or self-harming behavior; and removal of chatbots that falsely claim to be licensed professionals.

On privacy, the states want a comprehensive privacy program, clear disclosures about data use, effective opt-outs from targeted advertising, limits on using private conversations for AI training or other commercial purposes without valid consent, and a chance for consumers to access and delete their information before any sale. Character.AI collects private chats and voice calls, mental health disclosures, ages and device data, and uses that information to generate revenue and train its AI, according to the release.

The attorneys general said they will remain engaged in the bankruptcy and reserve the right to seek an independent consumer privacy ombudsman or to object to proposed sale procedures or a reorganization plan.

Massachusetts is one of the 40 jurisdictions on the filing, and Campbell's office would have standing to object to a sale that does not protect Massachusetts users. New York, the release says, has a new law requiring AI companion companies to detect and respond to expressions of suicidal thoughts and to remind users at least every three hours that they are talking to AI.

What happens next depends on the bankruptcy court's sale process. The court has not ruled on the states' requests, and no buyer had been publicly identified in the release.