Thirty-nine states seek safeguards in Character.AI bankruptcy

Thirty-nine states are seeking court-ordered protections for user privacy and child safety as part of the Character.AI bankruptcy proceedings. The coalition is requesting that any asset sale include binding safeguards to ensure that sensitive user conversations and youth-protection measures remain enforceable after the company’s restructuring.

The filing argues that AI governance obligations do not automatically expire when a company enters insolvency or is acquired. The states contend that the risks posed by minors’ interactions with the platform and the handling of private data must be addressed in the terms of a sale, not treated as liabilities that can be discharged or abandoned.

The intervention signals that regulators view AI-related consumer harms as durable obligations that can persist through corporate transactions. The outcome may influence how privacy and safety commitments are treated in future technology bankruptcies.