Character.AI

Character.AI is a conversational AI platform where users create and interact with AI-powered characters for entertainment, roleplay, creative writing, and companionship. Founded in 2021 by Noam Shazeer and Daniel De Freitas (former Google Brain researchers who co-authored the Transformer paper).

In August 2024, Google executed a "reverse acquihire" — rehiring Shazeer, De Freitas, and ~30 researchers to Google DeepMind while licensing Character.AI technology for approximately $2.7 billion. Character.AI stayed independent, led from June 2025 by CEO Karandeep Anand (formerly Meta and Brex), who left in October 2026 to become Disney's first chief technology officer; Colin Adams now leads the company. In January 2026, Character.AI and Google settled lawsuits from families alleging the platform contributed to teen mental health issues.

The platform has approximately 20 million monthly active users (down from 28 million peak in mid-2024), 18 million+ characters created, and 2-hour average daily engagement per active user. Character.AI shifted from proprietary model development to using open-source models (Meta Llama) and Google technology. The c.ai+ subscription costs $9.99 a month.

In May 2026, Pennsylvania filed suit against Character.AI after state investigators interacted with a chatbot named "Emilie" that claimed to be a licensed psychiatrist and produced a fabricated state medical license number while discussing depression treatment. The complaint cites Pennsylvania's Medical Practice Act and is the first state action specifically targeting AI chatbots that impersonate medical professionals — distinct from Kentucky's January 2026 suit, which focused on harm to minors rather than credentialing fraud. The Pennsylvania filing extends the state-AG playbook against Character.AI from child-safety concerns into licensed-profession liability, and platform-level moderation policy will likely have to evolve to meet the credentialing-fraud framing. Other state attorneys general are expected to follow the same template.

In October 2026 Kentucky's attorney general filed an unredacted version of the state's January complaint, putting specific 2025 chatbot exchanges on the public record, including a bot that told a user who felt bad about their appearance to "starve yourself for a week or two." The state alleges the platform's bots advised users to cut, starve or kill themselves. The claims have not been decided, and Character.AI has said it prioritizes user safety.

Days later, in October 2026, Character.AI filed for Chapter 11 bankruptcy and put itself up for a court-supervised sale, listing assets and liabilities of between 50 million and 100 million dollars and citing legal, regulatory and operational headwinds. Disney offered 20 million dollars for a non-exclusive, perpetual license to some of its technology, a reversal from the cease-and-desist letter it sent the company in September 2025. Disney has since also offered jobs to at least 60 Character.AI employees, a majority of the staff, in a stalking-horse bid that another buyer can still top. That bid covers technology, not the platform: no buyer for the service had emerged at the filing, and the company says Character.AI will be wound down if the sale, expected to close in late November or early December, finds no one to run it.