Character.ai's template sale contract leaves out the states' privacy demands

Character Technologies, the company behind Character.ai, filed a form asset purchase agreement in its Delaware bankruptcy case on 5 November. PPC Land reports that the 48-page document says nothing about users, minors or chat data. That leaves out conditions that a coalition of state attorneys general wants any buyer to accept.

What we know

The template covers assets that fall outside Disney's proposed $20 million deal. Disney's deal is a non-exclusive, perpetual licence to certain intellectual property and claims. According to PPC Land's review, the buyer's name, price, deposit and asset schedules are all left blank, and several key exhibits are cover pages only. Assets would be sold "as is" and "where is", representations would largely end at closing, and either side could walk away if the deal has not closed by 17 December.

The template does require buyers to confirm that they are not a "foreign person" under US investment-screening rules and not a "covered person" under Executive Order 14117, which governs bulk sensitive data. Statements, objections or investigations by attorneys general are excluded from what counts as a material adverse effect, so state action alone would not let a buyer back out.

On 14 October, 39 states and the District of Columbia set out nine conditions for a buyer. PPC Land lists them as including age assurance, crisis safeguards, limits on using chats for ad targeting or model training, and deleting data before a sale. The coalition later joined the US Trustee in asking for a consumer privacy ombudsman.

Why it matters

The real value of a companion platform sits in its user base and its conversation history, and that is exactly what this template leaves unaddressed. If the protections the states want are not written into the contract, they can only come through the court's sale order. That makes the December sale hearing the main point where regulators can exert pressure. For anyone bidding on distressed companion assets, the national-security representations show that the data is being treated as sensitive even though the privacy terms are missing. Buyers should expect conditions to be imposed late in the process.