# Character.AI Data Protections Remain Unresolved in Bankruptcy Sale

By John Kim

Canonical URL: https://www.tokenpost.com/news/business/32007
Published: 2026-10-14T18:54:46.000Z
Updated: 2026-10-14T18:54:46.000Z
Section: Business

> A coalition of 40 state attorneys general is asking a bankruptcy court to require safeguards for consumer information in any sale or transfer. The request does not determine whether user chats will transfer.

A coalition of 40 state attorneys general is asking a bankruptcy court to require protections for consumer information in any sale of Character.AI, while the available announcements do not specify whether user chats would transfer.

Character Technologies, the company behind the chatbot platform, filed for Chapter 11 on Oct. 12, 2026. It plans to keep the platform operating during a court-supervised sale.

Disney Worldwide Services agreed to serve as the stalking-horse bidder for a $20 million license covering certain intellectual property and company claims. The proposed license concerns specified assets and does not establish that Disney would receive users’ conversations.

The states are asking the court to require age-assurance systems, limits on minors’ interactions with chatbots, crisis safeguards and a way for users to delete their data. These are requested protections; they have not been imposed by the court.

New York Attorney General Letitia James said, “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’ office said several states had been investigating Character.AI since 2024 over consumer-protection, privacy and child-safety concerns. The concerns include age checks, chatbots posing as licensed professionals, exposure to sexual or violent material, safety claims and possible violations of state privacy laws.

Character.AI has said its platform remains live and that it will provide users with more information. The final sale terms and the court’s response to the states’ request have not been established.