Michigan joins 40 attorneys general seeking child-safety and privacy terms in the Character.AI sale
Fact. Attorney General Dana Nessel announced on October 15 that Michigan had joined a coalition of attorneys general from 39 states and the District of Columbia in a filing in the bankruptcy of Character Technologies, Inc., the company behind the Character.AI chatbot platform (In re Character Technologies, No. 26-11603, U.S. Bankruptcy Court for the District of Delaware). The company filed for Chapter 11 on October 12. The states’ notice, docketed October 14, says the company’s records show more than 21.6 million U.S. accounts created by March 13, 2025, including more than 2.1 million with a declared age under 18. It asks that any buyer adopt protections including age assurance that does not rely only on self-declared birthdates, removal of characters presenting as therapists, doctors or other licensed professionals, crisis-response protocols, and no use of chat content to train models or for advertising without valid consent, and it reserves the states’ right to seek a consumer privacy ombudsman and to object to any sale. Court filings name Disney Worldwide Services as the proposed lead bidder for certain assets at $20 million. Objections to the bidding procedures are due October 23, and the court hears them October 30.
NCI analysis. A bankruptcy sale is one of the few points where regulators can attach conditions to an AI system’s data and design without a new law, because the buyer acquires the users’ conversations along with the code. The states’ list amounts to a working definition of the safeguards an AI companion service should carry — age assurance, limits on professional personas, crisis protocols and no secondary use of chat data — and the October 30 hearing will show whether the court treats any of it as a condition of sale.
