Developing
The notice reserves rights and sets conditions; no court has ruled on them and no buyer for the app or data is named.
In 60 seconds
- The notice (case 26-11603, Judge Brendan L. Shannon) reserves states' rights over any sale of the business or user data.
- Nine conditions include age assurance, protections for minors, removal of characters posing as licensed professionals, ad opt-outs that honour past choices and a deletion window before any data sale.
- Figures cited: more than 21.6 million US accounts created by March 2025, over 2.1 million declared under 18, and about 163 million current and past users.
- Schedule: bids due November 20, auction November 23, sale hearing November 24.
Impact Layer
- What changed
- State regulators are stating in advance what any acquirer of AI chat data must do.
- Why it matters
- User chats can contain intimate information, and a bankruptcy sale is a rare moment when it could change hands.
- Who is affected
- Consumer AI companies, privacy teams and anyone who buys data or assets from a failing platform.
- Martech stack area
- AI, Data
- Stack impact
- If you hold chat or conversation data, review your retention, deletion and sale terms against these nine conditions.
- Business impact
- Moderate PPC Land's reading of the filing. The reason eleven states, including Texas and Florida, did not join is not stated, and the user-count discrepancy between the states and the company is unresolved.
- Related technologies
- What to watch
- Any court ruling on the conditions and who bids for the app or chats.
On October 14, 2026 attorneys general for 39 states and the District of Columbia filed a 28-page notice in the US Bankruptcy Court for the District of Delaware (case 26-11603, Judge Brendan L. Shannon), according to PPC Land. It reserves the states’ rights over any sale of Character.ai’s business or user data.
The conditions for any buyer (nine in the notice)
- Age assurance and protections for minors.
- Removal of characters posing as licensed professionals.
- Crisis safeguards and a privacy program.
- Account-level ad opt-outs that honour past choices.
- Limits on secondary use of chats.
- A deletion window for users before any data sale.
- Truthful marketing.
Figures cited
More than 21.6 million US accounts were created by March 13, 2025, including over 2.1 million declared under 18, per the Kentucky complaint. The states cite “over 20 million monthly active users” while the CEO’s declaration reportedly puts the figure near 12 million. About 163 million users are current and past. Ad revenue reached about $2.5 million in August 2026, up from about $0.5 million in July 2025.
Schedule
Bids are due November 20, the auction is November 23, the sale hearing is November 24, and Disney’s stalking-horse bid (a $20 million licence that excludes user data) has an outside date of December 17.
Not stated
Why eleven states, including Texas and Florida, did not join; whether any state has requested a privacy ombudsman; any buyer for the app or user data beyond Disney.
Our read
The conditions double as a checklist of what regulators expect from any AI chat product that holds minors’ data.
Sources
- PPC Land: Character.ai faces 40 attorneys general over who can buy its users' chats (opens in a new tab)
Source for the filing, conditions, figures and open points.