Mandatory Arbitration and Class Action Waiver

What it is

By agreeing to these terms, you give up your right to sue Character.AI in court or join a class action lawsuit, and must instead resolve disputes through private arbitration, except for small claims.

Why it matters (compliance & governance perspective)

Arbitration is a private process where a neutral third party decides disputes rather than a judge or jury. This waiver prevents users from joining together in class action lawsuits, which are often the only practical way to pursue small individual claims against a large company.

Consumer impact (what this means for users)

If you have a dispute with Character.AI, including over data privacy, content use, or account issues, you cannot sue in court or join a class action unless you opted out within 30 days of agreeing to the terms; you must instead use JAMS arbitration, and your total potential recovery is capped at $100 or amounts paid.

What you can do

Institutional analysis (Compliance & governance intelligence)

REGULATORY LANDSCAPE: This provision is governed by the Federal Arbitration Act (FAA) and is subject to ongoing scrutiny under California consumer protection law, which has periodically challenged the enforceability of class action waivers. The FTC has expressed concerns about mandatory arbitration clauses in consumer contracts as potentially unfair practices. EU/EEA users are generally not subject to binding arbitration waivers under EU consumer protection law, and class action waivers are not enforceable in many EU jurisdictions. GOVERNANCE EXPOSURE: High. The combination of mandatory arbitration, class action waiver, and a $100 liability cap creates a structure where individual users have limited practical recourse for small-value claims. The 30-day opt-out window is a standard mechanism, but its enforceability depends on adequate disclosure at onboarding. JAMS arbitration fees and procedures may create practical barriers for low-value consumer claims, though JAMS consumer rules include some fee protections. JURISDICTION FLAGS: EU/EEA users: mandatory arbitration clauses and class action waivers are generally unenforceable under EU consumer protection law and the EU's Collective Redress Directive. California: while the FAA generally preempts state law challenges to arbitration, California courts have scrutinized unconscionable arbitration terms, particularly in consumer contracts. The document's California-specific liability carve-out suggests awareness of these constraints. UK users post-Brexit are subject to UK consumer protection frameworks that similarly limit the scope of mandatory arbitration in consumer contracts. CONTRACT AND VENDOR IMPLICATIONS: Organizations deploying Character.AI under enterprise agreements should assess whether the arbitration clause applies to B2B relationships or only to consumer-facing terms. The pre-arbitration dispute resolution process requiring certified mail notice and a 60-day negotiation period adds procedural complexity that should be reflected in contract dispute management procedures. COMPLIANCE CONSIDERATIONS: Legal teams should confirm that the arbitration opt-out email address (legal@character.ai) is clearly disclosed to users at account creation and that the 30-day deadline is prominently surfaced. Consumer-facing disclosures should be audited for compliance with FTC guidance on arbitration clause disclosure. For EU/EEA deployments, the arbitration clause should be treated as inapplicable as a matter of local law, and dispute resolution procedures should reflect available court-based remedies.

Applicable agencies

Provision details

Other risks in this policy

• Perpetual Irrevocable Content License high
• AI-Generated Content License high
• Limitation of Liability and $100 Cap high
• Broad User Indemnification high
• Age Restrictions (13/16 Minimum) high
• Subscription Non-Refund Policy medium

Related Analysis

• Coinbase Requires Mandatory Arbitration. You Have 30 Days to Opt Out.

  Coinbase's User Agreement includes a mandatory arbitration clause that most users may not have reviewed. Here is what the clause states and how the opt-out process works.