Character.AI files for Chapter 11 with Disney as $20M stalking-horse bidder; 40 state AGs demand child-safety and data protections in any sale

Why it matters

【Key points】

Character Technologies, maker of the AI character chat app Character.AI, filed for Chapter 11 in Delaware on October 12 to sell substantially all its assets. Disney Worldwide Services is the stalking-horse bidder: $20 million for a non-exclusive perpetual license to certain IP and claims, plus transition services from former staff Disney hired; $7.5 million was paid up front. Higher bids are allowed and closing is expected in late November or early December. If no buyer keeps the platform running, it will be wound down. On October 14, attorneys general from 40 states asked that any buyer adopt age assurance, limits on minors, crisis safeguards and user data deletion.

【Verifiable】

CNBC: https://www.cnbc.com/2026/10/13/character-ai-chapter-11-disney-bid.html

Court filing: https://cases.stretto.com/public/x936/14939/PLEADINGS/1493910132680000000119.pdf

Colorado AG: https://coag.gov/press-releases/weiser-seeks-consumer-protections-in-character-ai-bankruptcy/

The states' notice cites over 20 million monthly users and more than 2.1 million U.S. accounts declaring an age under 18.

X: about 430 related posts in 24 hours, steady at 6 to 43 per hour.

【Our read】

1. Tens of millions of users, yet the platform barely sells: the founders went to Google in 2024 and Disney wants only a non-exclusive license. With models commoditized, a model-plus-characters app cannot carry inference costs and lawsuits.

2. The bigger precedent is chat logs as a bankruptcy asset. The states are setting terms for transferring AI conversation data that could shape future AI deals.

3. Watch whether a buyer takes the platform and whether the court adopts the states' conditions.