bbieron@platformeconomyinsights.com

Kentucky AG Sues Character.AI for Violating Consumer Protection Law

Jan 9, 2026

Report from Mountain Top Media

In Brief – Kentucky Attorney General Russell Coleman has sued the maker of AI companion chatbot Character.AI alleging that its platform harms children and misleads consumers about its safety. Coleman’s office argues the company marketed Character.AI, a role-playing chatbot platform that allows users to create custom characters often based on celebrities or pop culture figures, as safe and age-appropriate despite failing to implement effective age verification, parental controls, or meaningful safeguards for minors. The complaint alleges that this violated the Kentucky Consumer Protection Act by exposing minors to chatbots that shared sexually explicit content, encouraged drug and alcohol use, promoted eating disorders, and provided unlicensed mental-health advice. The lawsuit further claims the company also collected and monetized personal data from Kentucky children without adequate disclosure. The attorney general is seeking injunctive relief, civil penalties and the disgorgement of profits.

Context – Alleged harms to young people from engaging with AI “companions” has emerged as an AI version of the worst of social media. Character.AI and its partner Google recently agreed to settle lawsuits regarding teen suicide and self-harm bought by victims’ families in Florida, Colorado, Texas and New York. The settlements followed a decision last May by Federal Judge Anne Conway in Florida to reject the First Amendment-based motion to dismiss of Character.AI and Google and questioned whether chatbot output is speech at all. Character.AI later announced that they would bar users under 18 from their chatbots and enforce the rule with age verification technology. While social media platforms have largely been shielded from liability caused by user-generated content by Sec. 230, Supreme Court Justice Gorsuch has opined that AI services probably are not covered by the law. California enacted legislation late last year requiring companion chatbot developers to ensure that users are not misled into believing that they are interacting with a human.

View By Monthly
Latest Blog
Dutch Regulator Opens Digital Services Act Investigation of Roblox

Report from NL Times In Brief – The Netherlands Authority for Consumers and Markets (ACM) has launched a formal Digital Services Act (DSA) investigation of Roblox over concerns that the online gaming platform may not be doing enough to protect children. The DSA...

EU Commission Moves to Stop Meta from Banning Chatbots on WhatsApp

Report from Wall Street Journal In Brief – The European Commission has informed Meta that it plans to block the company’s ban on third-party AI chatbots from operating over WhatsApp. The antitrust regulator has reached a preliminary finding that Meta’s policy could...

Department of Justice and State AGs Appeal Google Search Remedies Order

Report from Bloomberg In Brief – The US Department of Justice has announced that it notified the Federal Court of Appeals for the District of Columbia that it will appeal US District Judge Amit Mehta’s remedies order in the federal antitrust lawsuit that found Google...

Governor Newsome Drops Funding for Media from California State Budget

Report from SFiST In Brief – The latest budget proposal from California Governor Gavin Newsom (D) has eliminated funding for the News Transformation Fund, a state initiative to pay millions of dollars to California media companies. The fund was announced in 2024 as...

Platform Economy Insights produces a short email four times a week that reviews two top stories with concise analysis. It is the best way to keep on top of the news you should know. Sign up for this free email here.

* indicates required