Disney is back in the crosshairs of pro-family advocates yet again. This time, the company is facing a wave of online backlash over its $20 million bid to license technology from Character.AI. In 2024, a Florida mother sued Character.AI, alleging its chatbot contributed to her 14-year-old son's suicide. The company and Google settled the case earlier this year. Character.AI is also under investigation by a multistate coalition that Wired reports had grown to 46 states and territories by the time the company filed for bankruptcy.
The criticism built over the past three days with major voices like Libs of TikTok taking to X posting: "BREAKING: Disney is reportedly attempting to absorb Character.AI, a company under investigation by MULTIPLE states after their chatbots allegedly encouraged children to hurt themselves and kill their parents. One example includes a 14-year-old Florida teen who committed suicide after just months of interaction with the company's AI chatbot."
Janet Kelly, Alliance For a Better Future CEO and former Virginia Secretary of Health, posted Wednesday about Sewell Setzer, who was 14 when he died. Minutes before, he told a Character.AI chatbot that he could finally "come home." The bot replied, "Please do, my sweet king." Kelly wrote that the move "may be best for Disney's bottom line, but I cannot imagine that the company's leadership fully understands the families that they are leaving behind." She added that she believes Disney's new CEO, Josh D'Amaro, "will do the right thing."
On Friday, Breanna Morello called the deal "CONCERNING," and Spanish-language commentator Emmanuel Rincón said parents "must be able to trust that their products are well designed for our children."
Character.AI filed for Chapter 11 bankruptcy on Oct. 12, and court filings show Disney hired most of the company's staff, including its former CEO Karandeep Anand. TechCrunch reports Disney agreed to make offers to at least 60 employees. Disney hopes to secure “a perpetual, worldwide, nonexclusive license for a huge range of Character.AI’s code, documentation, frameworks, tools, and 'other artifacts,' including those produced for its trust and safety moderation stack, training infrastructure, and age-prediction technology.”
Disney has paid $5.5 million plus a refundable $2 million deposit. It would pay another $12.5 million at closing if it wins the court-supervised sale. The deal is structured so that Character.AI, not Disney, keeps responsibility for the lawsuits and investigations.
John Newman, a University of Memphis law professor and former FTC official, told Wired: "It's bad for society to let companies exercise control without responsibility. And that's what it looks like."
The states investigating Character.AI have “reserved their rights to challenge any proposed sale or bankruptcy plan.”
Disney is not acquiring the company outright. According to Character.AI's announcement, Disney is the "stalking horse" bidder for a non-exclusive, perpetual license to certain company intellectual property and claims. That means its offer sets the floor and other bidders can still top it.
The controversy lands as Attorney General James Uthmeier has made AI accountability a signature issue, opening a criminal investigation into OpenAI in April.
