HARRISBURG, PA — Pennsylvania Attorney General Dave Sunday has joined a multistate effort to prevent sensitive consumer information, including children’s private conversations with artificial intelligence chatbots, from being transferred without adequate safeguards during the bankruptcy proceedings of Character Technologies Inc., the company behind Character.AI.
Pennsylvania and 37 other jurisdictions filed a notice in the proceedings raising privacy and consumer protection concerns about any potential sale of the company’s business or assets.
The filing seeks to ensure that personal information collected through Character.AI remains protected if the company’s assets are transferred to another owner.
Character.AI operates a platform that allows users to interact with AI-generated personalities, including fictional characters, celebrity personas and chatbots presenting themselves as medical or mental health professionals.
The platform has collected private conversations involving users’ mental health, relationships and emotional difficulties, according to the Pennsylvania Attorney General’s Office.
The states contend that the sensitivity of those conversations, particularly those involving children, requires additional scrutiny during the bankruptcy process.
“We have seen time and time again tech companies prioritize profits over the safety of their users — many of them children — so we must continue to do everything in our power to protect those consumers,” Sunday said.
The filing follows an investigation launched by several states, including Pennsylvania, after a 2024 wrongful death lawsuit alleged that interactions with Character.AI chatbots contributed to a child’s death by suicide.
The lawsuit alleged that the chatbots fostered an emotionally and sexually exploitative relationship with the child and reinforced suicidal thoughts. Those allegations prompted broader scrutiny of the platform’s consumer protection and privacy practices.
State investigators subsequently identified potential violations involving consumer safety and personal information, according to Sunday’s office.
Character.AI has voluntarily restricted minors’ access to certain chatbot features, but the states argue those safeguards remain incomplete and could be circumvented or reversed by a future purchaser.
That concern extends beyond the company’s current operations to the treatment of user information under any proposed bankruptcy sale or reorganization plan.
The attorneys general have reserved the right to challenge a proposed asset sale or bankruptcy plan and seek additional protections governing consumers’ personal information.
“We have already found toxic interactions and activity with this platform, and cannot assume sensitive and personal information will be handled properly,” Sunday said.
The coalition includes attorneys general from California, New York, New Jersey, Delaware and 33 other states and jurisdictions, including the District of Columbia.
Pennsylvania and the other participating jurisdictions intend to remain involved in the bankruptcy proceedings as the court considers potential asset transfers and the treatment of consumer data.
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