A court filing seeks protections for sensitive chatbot conversations and children’s data before any sale, while the company says its privacy practices remain unchanged.
NEW JERSEY – New Jersey has joined a coalition of state attorneys general seeking protections for consumers’ private conversations and personal information in the bankruptcy of Character Technologies Inc., the company behind Character.AI.
The states’ Oct. 14 notice in Delaware bankruptcy court asks that consumer safeguards be addressed in any sale or transfer of the company’s assets. The effort was announced by coalition members Oct. 15 and reported by WRNJ Oct. 17, including New Jersey’s participation.
The court filing identifies New Jersey through Attorney General Jennifer Davenport and Christopher L. Peterson, acting director of the Division of Consumer Affairs. It is a notice of interest and reservation of rights, not a ruling that the company violated the law or an order imposing the requested protections.
What the states want protected
Character.AI provides chatbot characters designed to simulate conversation. The states say the company holds sensitive information that can include chat and call content, health-related disclosures, account details, behavioral information and payment data.
Their filing calls for safeguards addressing age assurance, restrictions on minors’ access to open-ended chats, misleading professional personas, crisis-response systems and privacy compliance. It also seeks limits on secondary uses of conversations, including model training and advertising beyond uses to which consumers or parents validly consented.
The states want consumers to have an opportunity to delete their data before a sale of that information. They reserve the ability to object to sale procedures or a bankruptcy plan and to seek a consumer privacy ombudsman.
Those requests reflect concerns about both the transfer of existing information and the operation of a platform under a future owner. They do not establish that a transfer has occurred or that every requested restriction will become a condition of a sale.
California’s announcement says state investigations identified potential consumer-protection and privacy violations. It also says voluntary restrictions on minors’ use could be incomplete or reversed by a purchaser. Those are the regulators’ positions, rather than findings made by the bankruptcy court.
The company’s stated position
In an Oct. 12 statement and bankruptcy FAQ, Character.AI said it began the Chapter 11 process to pursue a court-supervised sale after reviewing its options amid legal, regulatory and operational pressures.
The company said it hoped a buyer would permit the platform to continue operating, but that it would wind down if a suitable bid did not emerge. It estimated that the sale process could finish by late November or early December.
Character.AI said its services remained available, subscriptions remained active and its data privacy and security practices were unchanged. It also directed users to account-deletion and data-export options.
In a separate Sept. 3 safety update, the company said it had removed open-ended character chat for users younger than 18 the previous year. It described age-assurance technology, parental activity reports and changes to how its systems respond to signs of distress.
The states’ notice seeks to ensure that protections continue through a sale and that any purchaser addresses unresolved regulatory concerns. The outcome will depend on the bankruptcy proceedings, including any proposed transaction and the conditions attached to it.