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
OpenAI Reaches Defense Department Deal Flanking Anthropic

Report from the New York Times In Brief – OpenAI says it has reached agreement with the US Department of Defense (DoD) to supply AI for classified systems in a manner that the company says addresses its opposition to the technology being misused in autonomous weapons...

Federal Judge Blocks Virginia’s One-Hour Time Limit for Social Media

Report from Reuters In Brief – US District Judge Patricia Tolliver Giles has issued a preliminary injunction blocking Virginia from enforcing Senate Bill 854 that imposes a time limit on teens using social media platforms with so-called “addictive” features. Platforms...

FTC Chairman Accuses Apple of News Media Viewpoint Discrimination

Report from the New York Times In Brief – The Federal Trade Commission announced that it sent a warning letter to Apple CEO Tim Cook expressing concerns that the operations of the Apple News may favor certain political viewpoints in a way that conflicts with Apple’s...

PM Starmer Proposes Bringing AI Chatbots Under the UK Online Safety Act

Report from Bloomberg In Brief – UK Prime Minister Keir Starmer has announced plans to bring AI chatbots directly under the Online Safety Act (OSA) to close what he called a “legal loophole” in Britain’s online safety regime and ensure that they are designed to not...

Reddit Fined By UK ICO for Failing to Age Check 13-Year-Olds

Report from the BBC In Brief – The UK’s data protection regulator, the Information Commissioner's Office (ICO), has fined Reddit more than £14 million for failing to adequately enforce its rules regarding children under 13 accessing the platform. Following an...

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