AI-rewritten: This is a summary of an article from The Verge, rewritten by AI (Qwen, running locally) to make it easier to read. The facts come from the original article – read it for the full story.

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State attorneys general are intervening in Character.AI’s bankruptcy case to protect user data from being sold to the highest bidder. New York Attorney General Letitia James led an effort by 40 bipartisan officials who filed a notice regarding regulatory issues that must be addressed before any assets or business parts are transferred. Although Character.AI announced it is filing for Chapter 11 and selling some assets to Disney, these officials warn there are serious risks involved due to the sensitive nature of user conversations, the large number of minors using the product, and specific product features that pose dangers.

The states had already opened investigations into consumer protection and privacy concerns in 2024 following a lawsuit from the mother of a 14-year-old who died by suicide after allegedly talking with the chatbot. According to James’ office, these probes uncovered exceptionally serious dangers and potentially unlawful conduct, including chatbots posing as licensed professionals, exposure to sexual and violent content, weak age checks, misleading safety claims, and potential violations of state privacy laws. The states had been working to address these issues but did not reach an agreement before the company filed for bankruptcy.

The attorneys general are urging the judge to require the purchaser to implement procedures that safeguard sensitive information. These requested measures include effective age-assurance systems, restrictions on how minors can engage with chatbots, crisis safeguards, and allowing users to delete their data. James stated that the company collected some of the most private thoughts children have ever shared and is fighting to ensure any buyer puts children’s safety first and puts real protections in place.