Companion Chat: Character.AI, Replika, Talkie, Zeta — 2026-09-19
Google and Character.AI are actively lobbying to shape state-level AI chatbot safety laws, seeking exemptions for key products while facing scrutiny over teen safety. Meanwhile, the EU’s proposed "Children’s Act" threatens to strip core memory features from companion apps for minors, and Korean startup Scatterlab is gaining traction with its Zeta app, emphasizing creator-driven storytelling.
Companion Chat: Character.AI, Replika, Talkie, Zeta — 2026-09-19
Top developments
Google and Character.AI push for regulatory carve-outs in state chatbot laws
As US states accelerate efforts to regulate AI companions, tech giants like Google and Character.AI are drafting model legislation that seeks to exempt specific product categories from stringent safety mandates. NPR reports that companies are attempting to write rules that protect their core engagement loops—such as persistent memory and personalized personas—from being restricted by minors-safety bills. This strategy aims to preempt a patchwork of state laws that could force technical changes to how these apps retain user data and interact with teens.
EU’s "Children’s Act" proposes deleting conversation memory for minors
The European Commission has released the full legislative text for the proposed EU "Children’s Act," which includes strict provisions for AI companion apps. The bill requires platforms like Character.AI and Replika to delete all conversation memories involving minors after the dialogue ends, unless explicit consent is granted. This measure directly targets the "emotional dependency" mechanism, where bots remember past interactions to build rapport, effectively neutralizing the primary retention strategy for underage users.
Character.AI pivots to "Entertainment and Fandom" branding
In a blog post published on September 18, Character.AI announced a strategic rebranding effort, positioning itself less as a "companion" service and more as a platform for "entertainment and fandom." The company highlights its focus on interactive fiction and community-driven character creation, aiming to distance itself from the "AI girlfriend/boyfriend" label that has drawn regulatory fire. This narrative shift coincides with ongoing legal settlements regarding teen safety and aims to appeal to advertisers and regulators by emphasizing creative utility over emotional dependency.
Korean AI companion Zeta gains global spotlight at Google AI Day
Scatterlab, the developer of the popular Korean AI character chat app "Zeta," participated in Google’s "AI App Day" in Singapore on September 17. CEO Kim Jong-yun presented Zeta’s approach to "AI storytelling," arguing that users are not just chatting with characters but experiencing real-time generated narratives. The appearance underscores the growing global interest in K-AI startups as alternatives to Western-dominated platforms, particularly in markets where emotional engagement is monetized through creator ecosystems rather than just subscription tiers.
Local view
South Korea: Local media outlets are closely monitoring the rapid adoption of AI character chats among teenagers (the "1020" demographic). Newsway reports that domestic operators are voluntarily accelerating the implementation of youth protection measures, such as time limits and content filters, to preempt government intervention. The article notes that unlike general productivity AI, relationship-based AI apps see significantly higher per-user usage time, raising alarms among parents and educators about potential addiction and emotional manipulation.
China: Chinese state media continues to emphasize the risks of AI companionship, particularly during the National Cybersecurity Awareness Week. Guangming Daily (via Sina) published an editorial urging "rational" use of virtual companions, warning against replacing real-world social interactions with AI. This aligns with the enforcement of China’s "Interim Measures for the Administration of Artificial Intelligence Anthropomorphic Interactive Services," which came into effect in July 2026, strictly prohibiting virtual intimate relationship services for minors.
Context & numbers
- Revenue Concentration: The AI companion market remains highly consolidated. Data indicates that the top 10% of companion apps capture 89% of total revenue, with only 33 apps having crossed the $1 million lifetime spending threshold. Character.AI, Replika, PolyBuzz, and Chai remain the dominant players in this landscape.
- Market Size: The sector was on track to pull in $120 million in annual revenue in 2025, with 128 new revenue-generating apps launched that year alone. This growth has attracted significant regulatory attention, including FTC inquiries into seven firms for potential deceptive practices targeting minors.
On the radar
- EU Children’s Act Legislative Process: The European Parliament is expected to debate the "Children’s Act" (EU KIDS Act) in the coming weeks. If passed, it would mandate age verification for social media accounts for under-13s and impose the memory-deletion rules on AI companions mentioned above.
- State-Level Age Verification Laws: Following California’s SB 243, more states are expected to introduce age-gating requirements for AI companions. Xident.io notes that a dozen states have already followed suit, forcing apps to implement robust ID verification or risk losing access to key markets.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
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