Illinois Attorney General Kwame Raoul has joined a bipartisan coalition of 40 attorneys general in filing a notice in the bankruptcy proceedings of Character Technologies, Inc., the company behind the chatbot platform Character.AI, according to a release from his office issued Tuesday.
Raoul's court filing identifies concerns about the company's safety and privacy practices and calls for protections for children and consumers in any sale of the company's business or assets, the release said.
"Character.AI's bankruptcy proceedings highlight the sensitive information collected by AI-chatbots and the need to ensure transparency and privacy," Raoul said in the release. "I will continue to work across party lines to ensure AI development is responsible and transparent and above all protects children's safety and the privacy of all users."
What Character.AI is
According to the release, Character.AI is an artificial intelligence chatbot platform that lets users interact with AI-powered "characters" designed to mimic human conversation and relationships. Those characters include fictional and celebrity personas, children's cartoon characters and others that present themselves as psychologists, therapists and doctors. The company has collected sensitive consumer data through those chats, including private conversations about users' mental health, relationships and emotional struggles, the release said.
The company filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware, and has agreed to sell some assets to The Walt Disney Company for $20 million, with Disney named as the lead, or "stalking horse," bidder, according to NBC News and Reuters reporting. The company said it expects the sale process to conclude by late November or early December.
Background of the investigation
Several states, including Illinois, began investigating Character.AI following a 2024 wrongful death lawsuit that alleged the company's chatbots fostered an emotionally and sexually exploitative relationship with a child, reinforced his suicidal thoughts and contributed to his death by suicide, the release said. The investigation identified potential consumer protection and privacy violations.
The filing highlights the significant volume of sensitive consumer information held by Character.AI, including private chatbot conversations involving children and adults, and identifies privacy and safety protections that should be addressed in any sale or transfer of the company's assets, according to the release.
The release said that although Character.AI has recently voluntarily restricted minors' access to certain chatbot features, the states have raised concerns that those measures are not compulsory, are incomplete and could be circumvented or reversed by a future purchaser.
Raoul and the coalition intend to remain actively engaged in the proceedings and have reserved their rights to challenge any proposed sale or bankruptcy plan and to seek additional protections for consumers' personal information, the release said.
The release said the filing is the latest in Raoul's efforts to protect consumers from the harms of AI. Earlier this year, Raoul and a coalition demanded that xAI, owner of the X platform and the Grok chatbot, take action to prevent Grok from generating nonconsensual intimate images and child sexual abuse material. In 2025, he co-led a coalition calling on major AI companies to ensure chatbots do not engage in sexually inappropriate conversations with children.
Joining Raoul in filing the notice are the attorneys general of Alaska, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Hawaii, Idaho, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin and West Virginia.