Attorneys general of 39 states and the District of Columbia have filed a Notice of Interest in the Character.AI Chapter 11 case seeking child-safety and data protections in any sale
Attorneys general of 39 states and the District of Columbia put bidders and the court on notice about safety and privacy issues in the Character.AI Chapter 11 case. The filing alleges, asks and reserves rights; it does not decide anything.
Bottom line: The filing is a notice and reservation of rights, not a ruling. Attorneys general of 39 states and the District of Columbia say they want child-safety and data protections written into any sale of Character Technologies, Inc. or its assets, and they reserve the right to object to a sale, bidding procedures or a plan.
Who this affects: AI companion and chatbot operators, prospective buyers of Character Technologies business, assets or user data, and bankruptcy, consumer-protection and privacy counsel.
Issue date: 14 October 2026. The filing sets no compliance date.
What changed: On 14 October 2026 the states filed a Notice of Interest and Reservation of Rights in In re Character Technologies, Inc., Case No. 26-11603-BLS (Bankr. D. Del.), raising regulatory, safety and privacy issues.
Analysis: In our reading, the filing gives bidders and counsel an early list of what these regulators say they would look for in a buyer. It creates no duty on its own, and the states describe their points as what they "would advocate".
- Instrument (English)
- Notice of Interest and Reservation of Rights by the Coalition of the State Attorneys General Regarding the Debtor's Outstanding Regulatory, Safety, and Privacy Issues (the caption spells the word "Coalition" as "Coaliton")
- Authority
- Coalition of state attorneys general, filed through National Association of Attorneys General bankruptcy counsel and other state counsel, in the U.S. Bankruptcy Court for the District of Delaware
- Jurisdiction
- United States (federal bankruptcy court; filers are 39 states and the District of Columbia)
- Status
- Filed 14 October 2026 in Case No. 26-11603-BLS (Chapter 11). A notice and reservation of rights; we did not review the docket for any later order
- Bindingness
- Not a court order or rule. It is a filing by the states that asks for protections and reserves rights; it does not by its terms bind the debtor, a buyer or the court
- Issue date
- 14 October 2026 (date on the filing and its certificate of service)
- Effective date
- Not applicable (a notice, not a regulation). No sale date, bid deadline or hearing date is stated in the filing
- What changed
- The states entered the Chapter 11 case on the record, described alleged safety and privacy problems, listed nine areas they would advocate a purchaser be ready to address, and reserved their rights
- Who this affects
- AI companion and chatbot operators, prospective buyers of Character Technologies business, assets or user data, and bankruptcy, consumer-protection and privacy counsel
- Primary source
- Notice of Interest and Reservation of Rights, as filed 14 October 2026 (337-page PDF with exhibits, hosted by the Washington AG)
- Workflow impact
- Not stated in the filing as a requirement. The states say they would advocate that a purchaser be prepared to implement age assurance, minor protections, crisis safeguards, a privacy program and limits on secondary use of chat data
- Operational next step
- Bidders and diligence counsel can compare the nine listed areas with the target's data, safety and marketing practices, and track the docket for a sale motion
- Last verified
- 2026-10-25
Primary source: Notice of Interest and Reservation of Rights, as filed 14 October 2026
Key takeaways
- The filing is a notice and reservation of rights. The states say they filed it "out of an abundance of caution" because bankruptcy cases move quickly.
- The states allege Character.AI was marketed to children and adults as harmless entertainment despite known safety risks. These are the states' assertions, and the debtor's response is not in the filing.
- The states list nine areas a purchaser would be expected to address in their view, from age assurance to limits on training with chat data.
- Each state reserves the right to seek a consumer privacy ombudsman and to object to a sale, bidding procedures or a plan.
What did the states file, and what is its legal weight?
On 14 October 2026 a coalition of state attorneys general filed a Notice of Interest and Reservation of Rights in the Chapter 11 case of Character Technologies, Inc., Case No. 26-11603-BLS, in the U.S. Bankruptcy Court for the District of Delaware. The caption lists 40 offices: 39 states and the District of Columbia, by our count. The signature pages show National Association of Attorneys General bankruptcy counsel signing for the "NAAG client states", with separate signature blocks for Colorado, Massachusetts, New Jersey, Oregon and Pennsylvania. The filing does not name a lead state. Reports that Tennessee is leading the coalition come from a regional news copy of a Tennessee release that we did not open.
The notice is not a ruling and imposes nothing by itself. The states say they filed it to put all parties on notice of the "regulatory issues that will need to be addressed in any sale or transfer of the Debtor's business or assets." The document is dated 14 October 2026 and is 337 pages with three exhibits: the Kentucky complaint (Exhibit A), the Pennsylvania complaint (Exhibit B) and a private-plaintiff complaint, A.F. v. Character Technologies (Exhibit C). Washington, Oregon, New York and Connecticut each issued a release dated 14 October 2026, and Virginia issued one dated 15 October 2026, describing the same filing.
What do the states allege about Character.AI?
The following are the states' statements in the filing, not findings by a court. The states say the debtor marketed Character.AI to children and adults as a harmless entertainment platform despite knowing that its chatbots posed serious safety risks. They say the debtor holds sensitive data on millions of people, citing more than 20 million monthly active users and, from a Kentucky complaint, more than 21.6 million U.S. accounts created by 13 March 2025, including more than 2.1 million with a declared age under 18.
The filing says several states opened investigations after a 2024 private wrongful-death suit and that subpoenas, civil investigative demands and information requests produced documents. It says the states found issues that "may constitute violations" of state law, listing chatbots posing as licensed professionals, minor exposure to explicit sexual content and self-harm, insufficient age assurance, misrepresentations about product safety, and failure to comply with state comprehensive privacy laws. The states say they worked with the debtor on terms but did not reach agreement before the bankruptcy filing. They say Kentucky is the only state to have filed a lawsuit against the debtor and its founders, in an action filed on 8 January 2026. The filing also points to a Pennsylvania action filed on 1 May 2026 alleging unlawful practice of medicine, and to private suits alleging harm to minors. It relies on third-party testing and research, such as Common Sense Media and ParentsTogether Action with Heat Initiative, which we did not independently review.
What protections do the states want in any sale?
The states acknowledge that the debtor has removed open-ended chat for users it identifies as under 18. They say that restriction reaches only users accurately identified as minors, can be circumvented, does not cover features such as "Stories", and that "this open-ended chat restriction is voluntary and could be rolled back at any time, including by a purchaser."
The filing says the states "would advocate that any purchaser be prepared to implement appropriate processes and procedures to comply with regulatory requirements." It lists nine areas.
| Area in the filing | What the states describe |
|---|---|
| 1. Age assurance | Age-verification or assurance not relying solely on self-declared birthdates |
| 2. Protections for minors | Keep limits on open-ended chat; protect minors from harmful content in Stories and other offerings |
| 3. Misleading chatbots | Remove characters that hold themselves out as therapists, psychologists, doctors, attorneys or other licensed professionals |
| 4. Crisis safeguards | Moderation and crisis-response protocols for self-harm, suicide, eating-disorder and substance-abuse content |
| 5. Privacy program | Reasonable safeguards, accurate disclosures, risk assessments and consent, including before processing sensitive data such as health information in chats |
| 6. Advertising opt-outs | Disclose any sale of data or disclosure for targeted advertising; account-level opt-outs; honor earlier opt-outs |
| 7. Limits on secondary use | No use of chat content to train or fine-tune models, or for advertising, beyond what consumers and parents validly consented to |
| 8. Access and deletion | Preserve access, and let all consumers delete their data before any sale of that data |
| 9. Truthful marketing | No false or misleading claims on safety, suitability for minors, whether characters are human, or credentials |
The closing section asks the court, the debtor and any potential purchaser to ensure a sale of any product, technology or personal information includes protective terms, "particularly for children", and notice to consumers.
What does it mean for operators, buyers and counsel, and what should they do now?
For a buyer of the business, its technology or its chat data, the filing signals that dozens of state regulators intend to stay engaged and are asking that these terms be addressed before closing. The filing sets out no sale timetable. In our reading, the data-related items (consent before processing sensitive chat data, limits on training use, deletion before transfer) matter beyond this case, because any company holding companion-chat logs could face the same questions in a sale or merger.
- Diligence counsel can map the nine areas against the target's age assurance, professional-persona controls, crisis protocols, privacy notices and consent records.
- Companion-chatbot operators can check whether characters claim professional credentials and whether privacy statements match what the product does with chat data.
- Restructuring and privacy counsel can watch the docket for a sale motion, bidding procedures or a request for a consumer privacy ombudsman, which the states reserve the right to seek.
- Treat the states' statements as allegations until a court or settlement says otherwise.
What are the key dates and parties?
| Item | Detail |
|---|---|
| Filing date | 14 October 2026 |
| Court and case | U.S. Bankruptcy Court, District of Delaware; In re Character Technologies, Inc., No. 26-11603-BLS (Chapter 11) |
| Kentucky enforcement action | Filed 8 January 2026, Franklin Circuit Court, No. 26-CI-00029 (per the filing) |
| Pennsylvania action | Filed 1 May 2026, Commonwealth Court, 220 MD 2026 (per the filing) |
| Sale date, bid deadline, hearing | None stated in the filing |
FAQ
Is the states' Character.AI bankruptcy notice a court ruling?
No. It is a Notice of Interest and Reservation of Rights filed by the states on 14 October 2026. It asks the court, the debtor and any purchaser to include protections in a sale and reserves the states' rights to object. We did not review the docket for any order.
How many states are on the filing?
The caption lists 40 offices: 39 states and the District of Columbia, by our count. Washington, Virginia, Connecticut and New York releases describe the same coalition. The filing itself names no lead state.
Does the filing prove that Character.AI broke any law?
No. It says the states' investigations found issues that "may constitute violations" of state law. Those are allegations and concerns. The filing says only Kentucky has sued the debtor and its founders; it also cites a Pennsylvania action and private suits, and it does not report a finding by any court.
What do the states want in any sale?
They say they would advocate that a purchaser be ready to implement nine areas: age assurance, protections for minors, removal of chatbots posing as licensed professionals, crisis safeguards, a privacy program, advertising opt-outs, limits on secondary use of chat data, access and deletion, and truthful marketing.
What rights do the states reserve?
Each state reserves its rights, including the right to seek appointment of a consumer privacy ombudsman, to object to any proposed sale, bidding procedures or plan, to supplement the notice, or to seek other relief.
What we did not verify
What we opened: the 337-page filing as hosted by the Washington Attorney General, and the Washington, Virginia, Connecticut, Oregon and New York releases, on 25 October 2026. The filing's main text runs 28 pages; we read it and the exhibit cover pages, and did not read the exhibits in full.
What we did not open: the bankruptcy docket, any sale motion or order, the debtor's response, the third-party studies and reports the filing cites, the California and North Carolina releases (North Carolina's returned a block page), and the Tennessee release. Tennessee's reported lead role is not confirmed. The count of 40 is ours, from the caption; we did not match it to a docket entry number.
What we refuse to claim: that any court has found a violation, that the debtor has responded or settled, that a sale has been proposed or scheduled, or that a purchaser will be bound by any of the nine listed areas.
The Character.AI notice is a filing by 40 attorney-general offices, not a ruling. Its nine listed areas show what these states say they would look for in a buyer, and the underlying safety and privacy points remain allegations.
Related briefings
- AI Regulation News hub
- North America AI regulation tracker
- Attorneys and AI regulation
- Italy: Garante and Character.AI on minors and age verification
- Pennsylvania: action against Character.AI over chatbots claiming to be doctors
- California SB 243 on companion chatbot safety
- Washington HB 2225 on AI companion chatbot safety
Source File
Secondary: State releases (Washington, Oregon, New York and Connecticut dated 14 October 2026; Virginia dated 15 October 2026) from the Washington, Virginia, Connecticut, Oregon and New York attorneys general, used to confirm the filing date, the coalition and the reservation of rights.
Last checked: 2026-10-25 (UTC)
Status: Filed notice and reservation of rights; not a ruling. State characterizations are allegations.
Editorial note: Informational analysis for working professionals, not legal advice. Confirm how any rule applies to your situation with qualified counsel.
Informational analysis for working professionals, not legal advice. Confirm how any rule applies to your situation with qualified counsel.
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