A coalition of state attorneys general has asked the bankruptcy court, Character.AI and potential buyers to address users' data and safety in any sale of the company's business or assets. The states' October 14 notice proposes conditions on access to chat records, deletion before a sale of personal data and uses that go beyond what users consented to. It is a statement of the states' position, not a court order or an agreed sale term.

The filing follows Character.AI's Chapter 11 announcement earlier this week. That announcement described Disney's $20 million opening offer for a limited license and a separate process to sell all or substantially all of Character.AI's assets. Neither announcement settled who would operate the service after the sale. The states' new filing addresses what they want protected if a purchaser takes the business, product or consumer data.

The big change

  • What changed: State officials put their proposed privacy and safety conditions before the court in Character Technologies' Chapter 11 case on October 14. They ask for consumer protections in any sale and reserve the right to challenge proposed terms.
  • Why it matters: A buyer's treatment of chat content and other personal data could be part of sale negotiations. The states want users to retain access and a chance to delete data before any sale of that data, alongside limits on new uses without valid consent.
  • What to watch: The actual sale proposal, bidding procedures and any court ruling will show whether these requests become enforceable terms. The notice itself does not grant a new deletion window or determine that user data will be transferred.

What the states want for user data

The notice says Character.AI holds account details, chat and call content, behavioral information, device identifiers and subscription information. Those are the states' descriptions of data the company has collected; BIG CHANGE has not independently inspected its systems or tested the service.

For a purchaser, the states advocate a privacy program with safeguards, accurate disclosures, risk assessments and required consent before processing sensitive information such as health disclosures in chats. They also seek account-level controls to opt out of personal-data sales or targeted advertising, including respect for opt-outs already made. Their proposed limits would prevent chat content and related data from being used to train or fine-tune models, for advertising or for other commercial purposes beyond uses to which consumers and parents validly consented.

The states want consumers to keep access to the data held about them and have an opportunity to delete it before any sale of that data. The notice does not say a data sale has been approved or set a deadline for exercising that proposed opportunity. Character.AI's existing export instructions, covered in our earlier report, say an export request can take three to four weeks. That is the company's documented process; the states' filing creates no new export right.

Safety conditions also on the table

The states ask a purchaser to use age assurance that does not depend only on a self-declared birthdate, maintain restrictions on minors' open-ended chats and protect them in other features such as Stories. They seek removal of characters presented as licensed professionals, crisis-response protocols that cannot be dismissed with a simple click, and truthful statements about the product's safety and suitability for minors. The filing says Character.AI has already restricted open-ended chats for users it identifies as under 18, while arguing that its current measures leave gaps. These are the states' findings and proposals; the notice does not establish a new product rule.

The states say they tried to agree on terms with Character.AI before bankruptcy but had not reached a resolution. They now reserve the right to object to a proposed sale or bidding process, seek a consumer privacy ombudsman or request other relief. The proposed sale terms and any court ruling will show which protections, if any, become obligations for Character.AI or a buyer.

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