Character.AI: Custom Chatbots, Minor Restrictions and Lawsuits

Character entertainment and a sale process

Character.AI is operated by Character Technologies Inc., which identifies itself as doing business as Character.ai. The platform lets people create characters and interact with them through conversation and entertainment experiences. Its contribution is a consumer interface for customizable AI personalities, including tools for creators and a distribution platform for their characters. [1]

The company announced restrictions on open-ended chat for minors on October 29, 2025, with removal due no later than November 25 and interim time limits. Earlier, a federal court allowed most claims in a wrongful-death suit to proceed. That order declined to hold the chatbot's output protected speech at the pleading stage; it did not establish liability for the allegations or categorically decide the status of every AI output. [2][3]

On October 12, 2026, Character.AI announced voluntary Chapter 11 proceedings to pursue a court-supervised sale. It said the service remained running while it sought a proposal that would permit continued operations, with wind-down possible if none emerged. This was a sale process, rather than a completed transfer to an identified buyer. [4]