Companies
Character.AI files for bankruptcy, and Disney, which accused it of misuse, wants its technology
The app for chatting with AI characters has filed for bankruptcy under US law. Disney is offering $20 million for part of its technology. If no one buys the rest, the platform will shut down.
The essentials
2 confirmed facts · 2 according to the source · 3 open questions
- Disney is offering $20 million for part of Character.AI's technology, with a license to use it forever, on a non-exclusive basis.12
- Character.AI has filed for bankruptcy under US law and lists between $50 million and $100 million in assets and debts.12
- According to the sourceThe company says it has no buyer for the rest and that, if none comes forward, it will shut down the platform.1
- According to the sourceIn September 2025, Disney demanded that Character.AI stop using its characters, according to Axios, as cited by Ars Technica.2
Why it matters
Character.AI was one of the AI apps where people spent the most time, and yet it hasn't survived. TechCrunch points to one reason: the more people use an AI chatbot, the more it costs to run. If that's true, having a large audience isn't enough for these products to pay for themselves.
If you use Character.AI, it still works for now. But the company warns that it may shut down if it doesn't find a buyer before the sale ends.
The details
According to Character.AI's CEO, Colin Adams, the board decided to sell the company under a judge's supervision after reviewing the alternatives. The sale is expected to close in late November or early December. In the meantime, the app keeps running. Adams admits there is still no offer for the company as a whole. If none comes, the platform will shut down1.
Disney's move is surprising. In September 2025, it sent Character.AI a letter demanding that it stop using its characters, which, according to Disney, the company was using in a way that could damage its brand in the long run, Axios reported, as cited by Ars Technica2. On top of that, Character.AI's former CEO, Karandeep Singh Anand, and several employees moved to Disney last month1.
What we don't know
- Exactly which technology Disney wants, and for what: the announcement doesn't say.
- Whether anyone will make an offer for the whole platform to keep it running.
- What will happen to the conversations and characters users have created if the platform shuts down.
Background
Character.AI was launched in late 2021 by two former Google engineers. In 2024, Google paid $2.7 billion for a license to use its models, and the founders went back to Google. Then came the lawsuits, including one from the mother of a 14-year-old boy in Florida who took his own life. The company settled some of them, added safety measures and banned minors from using the platform1.
Sources
- 1Just 5 years in, interactive chatbot platform Character.AI files for bankruptcy
- 2Disney offers $20M for Character.AI’s scandal-plagued chatbot tech
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