Disney has submitted a $20 million offer to obtain a “perpetual, nonexclusive license” to some of the intellectual property owned by Character Technologies, the company operating the Character.AI platform, as part of recently initiated bankruptcy proceedings. The announcement does not specify in detail which technical assets Disney is targeting, and the offer may face competition from other buyers.
The move comes a year after Disney publicly criticized Character.AI. In September 2025, Disney sent a letter demanding that the use of its characters stop, accusing the platform of employing them in ways that could harm its brand and saying that some chatbots contained exploitative or harmful content involving children. The dispute ended with Disney-owned characters being removed from the platform.
However, the relationship between the two companies later changed, as Disney appointed Karandip Anand, Character.AI’s former chief technology officer, as its first chief technology officer. Disney has not explained whether it intends to use the technology in products aimed at children, and it did not respond to Ars Technica’s request for comment.
A Popular Platform Under Legal Pressure
Character.AI has operated for four years, and bankruptcy documents say it has a large and engaged user base. A company post last year said its services attracted more than 20 million monthly active users. Nevertheless, the company was harmed by lawsuits and legal risks related to chatbot behavior.
The company previously settled a prominent lawsuit that accused its chatbots of encouraging a 14-year-old teenager, Sewell Setzer III, to commit suicide. Kentucky and Pennsylvania also filed lawsuits; Kentucky accuses the company’s bots of encouraging self-harm, while Pennsylvania says the chatbots impersonated licensed doctors.
Character.AI assured users that the platform would remain available during the sale proceedings and that current subscriptions would continue to be charged unless a change affected the existing agreements. The company expects to complete the deal in late November or early December 2026, but warned that the service could be shut down if no buyer willing to assume the potential liabilities emerges.
What Changes in Practice?
The offer does not yet mean that Character.AI will transfer to Disney; it concerns a license for some of the technology and may not include the platform, its brand, or its data. The continuation of the service under a new owner could also affect safety measures, according to the company’s own filing, making the purchase of the technology separately from the platform a potential option for a buyer seeking to avoid brand and litigation risks.
Concerns About User Data
Character Technologies has not explained whether sensitive data will be included in the sale. Its privacy policy states that information may be transferred during the sale of company assets, including identifying information, audio data, and conversation records. The policy merely warns that users do not need to enter sensitive personal information, even though the nature of conversations with chatbots may lead users to share this type of data.
Bankruptcy documents estimate the company’s assets and liabilities at between $50 million and $100 million. Therefore, the outcome of the proceedings concerns not only the fate of the technology, but also how user data, conversation records, and legal liabilities will be handled if the assets are transferred to a new party or the company shuts down permanently.