Politics
Colorado joins multistate push to protect Character.AI users in bankruptcy
Colorado Attorney General Phil Weiser and other state attorneys general are asking a bankruptcy court to protect users’ privacy and safety if Character.AI’s business or assets are sold. The chatbot company is facing scrutiny over risks to children and sensitive personal information.
Colorado Attorney General Phil Weiser is leading a coalition of state attorneys general seeking consumer safeguards in the bankruptcy case of Character.AI, a chatbot company whose services have drawn scrutiny over child safety and privacy.
Character.AI filed for Chapter 11 bankruptcy earlier this week. In a notice filed in the proceedings, the states urged protections for sensitive consumer information and said privacy and safety concerns should be addressed in any sale or transfer of the company’s business or assets.
The company, launched in 2021, lets users converse with customizable AI characters. Before its bankruptcy filing, it reached an agreement naming Disney a “stalking horse” bidder to license some of its intellectual property, according to CNBC. Character.AI said in a blog post that a court-supervised sale process offered the best opportunity to maximize value for stakeholders amid legal, regulatory and operational challenges.
The company has faced legal and regulatory scrutiny for several years. A 2024 wrongful-death lawsuit in Florida alleged that Character.AI chatbots reinforced a 14-year-old boy’s suicidal thoughts. Colorado and other states investigated the company, identifying potential consumer-protection and privacy violations.
“Bankruptcy cannot become a way for a company to walk away from its responsibility to protect children and consumers,” Weiser said. He cited concerns including children’s exposure to sexual content, dangerous advice and encouragement of self-harm, and said the coalition wants protections to remain in place regardless of who owns the company.
Colorado lawmakers have also established rules for chatbot companies. House Bill 1263, passed during the last legislative session, requires developers to tell minors they are interacting with a chatbot, bars engagement points or rewards aimed at minors, and requires reasonable measures to prevent sexually explicit material and statements simulating emotional dependence.
Rep. Sean Camacho, a Denver Democrat who sponsored the measure, said the law is intended to protect users, particularly children, from misleading chatbot interactions. The bankruptcy case now raises a practical question for regulators and families: whether safeguards for users’ information and safety will carry over if the company’s assets change hands.