Business

Character.AI bans teen chats amid lawsuits and regulatory scrutiny

Published

3 months ago

October 29, 2025

AI startup Character.AI is cutting off young people’s access to its virtual characters after several lawsuits accused the company of endangering children. The company announced on Wednesday that it would remove the ability for users under 18 to engage in “open-ended” chats with AI personas on its platform, with the update taking effect by November 25.

The company also said it was launching a new age assurance system to help verify users’ ages and group them into the correct age brackets.

“Between now and then, we will be working to build an under-18 experience that still gives our teen users ways to be creative—for example, by creating videos, stories, and streams with Characters,” the company said in a statement shared with Fortune. “During this transition period, we will also limit chat time for users under 18. The limit initially will be two hours per day and will ramp down in the coming weeks before November 25.”

Character.AI said the change was made in response, at least in part, to regulatory scrutiny, citing inquiries from regulators about the content teens may encounter when chatting with AI characters. The FTC is currently probing seven companies—including OpenAI and Character.AI—to better understand how their chatbots affect children. The company is also facing several lawsuits related to young users, including at least one connected to a teenager’s suicide.

Another lawsuit, filed by two families in Texas, accuses Character.AI of psychological abuse of two minors aged 11 and 17. According to the suit, a chatbot hosted on the platform told one of the young users to engage in self-harm and encouraged violence against his parents—suggesting that killing them could be a “reasonable response” to restrictions on his screen time.

Various news reports have also found that the platform allows users to create AI bots based on deceased children. In 2024, the BBC found several bots impersonating British teenagers Brianna Ghey, who was murdered in 2023, and Molly Russell, who died by suicide at 14 after viewing online material related to self-harm. AI characters based on 14-year-old Sewell Setzer III, who died by suicide minutes after interacting with an AI bot hosted by Character.AI and whose death is central to a prominent lawsuit against the company, were also found on the site, Fortune previously reported.

Earlier this month, the Bureau of Investigative Journalism (TBIJ) found that a chatbot modeled on convicted pedophile Jeffrey Epstein had logged more than 3,000 conversations with users via the platform. The outlet reported that the so-called “Bestie Epstein” avatar continued to flirt with a reporter even after the reporter, who is an adult, told the chatbot that she was a child. It was among several bots flagged by TBIJ that were later taken down by Character.AI.

In a statement shared with Fortune, Meetali Jain, executive director of the Tech Justice Law Project and a lawyer representing several plaintiffs suing Character.AI, welcomed the move as a “good first step” but questioned how the policy would be implemented.

“They have not addressed how they will operationalize age verification, how they will ensure their methods are privacy-preserving, nor have they addressed the possible psychological impact of suddenly disabling access to young users, given the emotional dependencies that have been created,” Jain said.

“Moreover, these changes do not address the underlying design features that facilitate these emotional dependencies—not just for children, but also for people over 18. We need more action from lawmakers, regulators, and regular people who, by sharing their stories of personal harm, help combat tech companies’ narrative that their products are inevitable and beneficial to all as is,” she added.

A new precedent for AI safety

Banning under-18s from using the platform marks a dramatic policy change for the company, which was founded by Google engineers Daniel De Freitas and Noam Shazeer. The company said the change aims to set a “precedent that prioritizes teen safety while still offering young users opportunities to discover, play, and create,” noting it was going further than its peers in its effort to protect minors.

Character.AI is not alone in facing scrutiny over teen safety and AI chatbot behavior.

Earlier this year, internal documents obtained by Reuters suggested that Meta’s AI chatbot could, under company guidelines, engage in “romantic or sensual” conversations with children and even comment on their attractiveness.

A Meta spokesperson previously told Fortune that the examples reported by Reuters were inaccurate and have since been removed. Meta has also introduced new parental controls that will allow parents to block their children from chatting with AI characters on Facebook, Instagram, and the Meta AI app. The new safeguards, rolling out early next year in the U.S., U.K., Canada, and Australia, will also let parents block specific bots and view summaries of the topics their teens discuss with AI.

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Business

Crypto market reels in face of tariff turmoil, Bitcoin falls below $90,000 as key legislation stalls

Published

27 minutes ago

January 20, 2026

Jace Porter

If you don’t like the price of Bitcoin, wait five minutes, and it will change. The major cryptocurrency’s volatility has been on full display to start the year, this time dipping about 7% since last week to its current price of just under $90,000 as of mid-day Tuesday.

Other cryptocurrencies have also slid. Ethereum is down 11% in the last six days to its current price of about $3,000, and Solana is down about 14% during that time to its price of about $127.

The dip comes as President Donald Trump threatened European nations with tariffs as they pushed back against his plans to take over Greenland, causing markets to scramble. Meanwhile, crypto markets faced an additional headwind as key legislation for the industry, known as the Clarity Act, became stalled after industry giant Coinbase unexpectedly withdrew its support late last week.

“President Trump’s threat to impose tariffs on Europe has put Bitcoin under pressure,” said Russell Thompson, chief investment officer at Hilbert Group. “The postponement of the Clarity Act in the Senate committee mainly due to concerns from Coinbase eliminated a large amount of positive sentiment in the market.”

Coinbase CEO Brian Armstrong objected to the Clarity Act primarily on grounds that crypto owners would not be able to earn yield from stablecoins. The new uncertainty over the bill, which many assumed was on a smooth path towards a Presidential signature, has shaken the price not just of crypto assets but also the share price of companies exposed to digital assets.

It’s uncertain whether the current headwinds will fade anytime soon. Trump has made his intentions of taking control of Greenland clear. When a group of European nations expressed solidarity with the Danish, he threatened those countries with tariffs, saying he would not back down until Greenland was purchased. Bitcoin and other risk assets subsequently fell, along with major stock indices, while the price of gold rose.

It’s not all gloom and doom for crypto, at least according to some analysts, who view Bitcoin’s correlation with macroeconomic forces as confirmation that digital assets have finally gone mainstream.

“Bitcoin’s reactivity is another sign of its increasing integration with broader macroeconomic forces, signaling maturation rather than fragility, even as short-term volatility continues,” said Beto Aparicio, senior manager of strategic finance at Offchain Labs.

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Business

The 9 most disruptive deals of Trump’s first year back in the White House

Published

58 minutes ago

January 20, 2026

Jace Porter

President Trump lives on deals: “That’s what I do—I do deals,” he once told Bob Woodward. On the one-year anniversary of his second presidency, he’s pushing hard to make his biggest, most disruptive deal ever, one that would bring Greenland under the control of the U.S.—and the global business community is still scrambling to adapt to his approach. Here are nine of Trump’s most unorthodox deals from the past year.

Nine deals that shook the business world

April 2, 2025: Reciprocal tariffs

Trump imposes “reciprocal tariffs” on 57 countries, with each tariff understood as an opening bid in a negotiation. Several countries have since made deals. The one-on-one negotiations, unlike the multilateral system of the past 80 years, can be chaotic for companies and economies

June 13: U.S. Steel “Golden Share”

In return for allowing Nippon Steel to buy U.S. Steel, Trump requires that the U.S. receive several powers over the company, including total power over all the board’s independent directors and vetoes over locations of offices and factories.

July 10: MP Materials

The U.S. pays $400 million for a large equity share in MP and signs a contract to buy all of MP’s rare earth magnets for 10 years. The reason for the equity stake was not disclosed.

July 14: Nvidia, Part 1

JADE GAO—AFP/Getty Images

Trump reverses the U.S. ban on selling Nvidia H20 chips to China in exchange for Nvidia paying the U.S. 15% of the revenue.

July 23: Columbia University

The Trump administration restores $400 million of canceled federal research funding for the university under an unprecedented multipoint deal. For example, Columbia must supply data to the federal government for all applicants, broken down by race, “color,” GPA, and standardized test performance. A few other schools later make similar deals.

August 6: Apple

At a public appearance with Trump, CEO Tim Cook announces Apple will invest an additional $100 billion in the U.S. over four years; Trump announces Apple will be exempt from a planned tariff on imported chips that would have doubled the price of iPhones in the U.S.

August 22: Intel

Intel trades the U.S. government a 9.9% equity stake in exchange for $8.9 billion that might already be owed to Intel under the CHIPS and Science Act. The deal is unusual because the company was not in immediate danger or significantly affecting the economy.

December 8: Nvidia, Part 2:

Trump reverses the U.S. ban on selling powerful Nvidia H200 chips in exchange for Nvidia paying the U.S. 25% of the revenue. Both Nvidia deals are unusual because the payments to the U.S., based on exports, appear to be forbidden by the Constitution.

December 19: Pharma

Nine pharmaceutical companies make deals with Trump that are intended to lower drug prices. This is unusual because Trump negotiated separate deals with each company, and the terms have not been released.

All eyes this week will be watching President Trump at the World Economic Forum in Davos, where the president has hinted he’ll announce some high-stakes agreements. Expect the unexpected.

A version of this piece appears in the February/March 2026 issue of Fortune.

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Business

Microsoft CEO Satya Nadella’s biggest AI bubble warning yet is a challenge to the Fortune 500

Published

1 hour ago

January 20, 2026

Jace Porter

Microsoft CEO Satya Nadella has been leading the charge on artificial intelligence (AI) for years, owing to his long alliance with OpenAI’s Sam Altman and the groundbreaking work from his own AI CEO, Mustafa Suleyman, particularly with the Copilot tool. But Nadella has not spoken often about the fears that rattled Wall Street for much of the back half of 2025: whether AI is a bubble.

At the World Economic Forum annual meeting in Davos, Switzerland, Nadella sat for a conversation with the Forum’s interim co-chair, BlackRock CEO Larry Fink, explaining that if AI growth spawns solely from investment, then that could be signs of a bubble. “A telltale sign of if it’s a bubble would be if all we are talking about are the tech firms,” Nadella said. “If all we talk about is what’s happening to the technology side then it’s just purely supply side.”

However, Nadella offers a fix to that productivity dilemma, calling on business leaders to adopt a new approach to knowledge work by shifting workflows to match the structural design of AI. “The mindset we as leaders should have is, we need to think about changing the work—the workflow—with the technology.”

Growing pains

This change is not wholly unprecedented, as Nadella pointed out, comparing the current moment to that of the 1980s, when computing revolutionized the workplace and opened up new opportunities for growth and productivity and created a new class of workers. “We invented this entire class of thing called knowledge work, where people started really using computers to amplify what we were trying to achieve using software,” he said. “I think in the context of AI, that same thing is going to happen.”

Nadella argues that AI creates a “complete inversion” of how information moves through a business, replacing slow, hierarchical processes with a view that forces leaders to rethink their organizational structures. “We have an organization, we have departments, we have these specializations, and the information trickles up,” Nadella said. “No, no, it’s actually it flattens the entire information flow. So once you start having that, you have to redesign structurally.”

That shift may be harder for some Fortune 500 companies as structural changes could be accompanied by uncomfortable growing pains. Nadella says that leaner companies will be able to more easily adopt AI because their organizational structures are fresher and more malleable. On the other hand, large companies could take time to adopt new workflows.

Despite widespread adoption of AI, the 29th edition of PwC’s global CEO survey found that only 10% to 12% of companies reported seeing benefits of the technology on the revenue or cost side, while 56% reported getting nothing out of it. It follows up on an even more pessimistic finding about AI returns from August 2025: that 95% of generative AI pilots were failing.

PwC Global Chairman Mohamed Kande spoke to Fortune’s Diane Brady in Davos about the finding that many CEOs are cautious and lack confidence at this stage of the AI adoption cycle. “Somehow AI moves so fast … that people forgot that the adoption of technology, you have to go to the basics,” he explained, with the survey finding that the companies seeing benefits from AI are “putting the foundations in place.” It’s about execution more than it is about technology, he argued, and good management and leadership are really going to matter going forward.

“For large organizations,” Nadella told Fink, “there’s a fundamental challenge: Unless and until your rate of change keeps up with what is possible, you’re going to get schooled by someone small being able to achieve scale because of these tools.”

New entrants have the advantage of “starting fresh” and constructing workflows around AI capabilities, while larger firms will have to contend with the flattening effect AI has on entire departments and specializations.

To be sure, Nadella says that large organizations have kept an upper hand, especially when it comes to relationships, data, and know-how. However, he maintains that firms must understand how to use those resources to their advantage to change management style, then that could pose a major roadblock.

“The bottom line is, if you don’t translate that with a new production function, then you really will be stuck,” he said.

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