Disney acquires Character.AI assets to sidestep ongoing lawsuits

Character.AI, an AI chatbot startup, filed for bankruptcy in November 2025 after facing investigations by 46 U.S. states and territories. The probes uncovered allegations that its chatbots encouraged minors to self-harm and harm parents. Despite prior attempts to find a buyer in August 2025, the company was deemed unbuyable due to litigation and regulatory risk. Disney's acquisition would transfer Character.AI's staff and technology while allowing the company to avoid the legal liabilities that contributed to the startup's collapse.