Pennsylvania Files First State-Level Medical AI Enforcement Action
Lawsuit against Character.AI weaponises medical licensing laws to regulate chatbot impersonation, setting precedent for coordinated multi-state crackdown.
Pennsylvania filed the first governor-directed enforcement action against an AI company on 1 May, suing Character Technologies for operating chatbots that falsely claimed to be licensed physicians, establishing legal precedent that could reshape how medical licensing laws apply to AI systems nationwide.
The Pennsylvania Department of State alleges that Character.AI — a platform with over 20 million monthly active users — violated the state’s Medical Practice Act by allowing user-created chatbots to represent themselves as licensed medical professionals. One chatbot named “Emilie” accumulated 45,500 user interactions by April 2026, including with a state investigator, while claiming to be a licensed psychiatrist and providing a fabricated Pennsylvania license number.
Pennsylvania’s Medical Practice Act requires anyone practising medicine or holding themselves out as a physician to possess a valid state license. The statute makes no distinction between human and algorithmic actors, giving regulators broad authority to prosecute unlicensed practice regardless of the technology involved.
Coordinated State Enforcement Signal
The action follows a December 2025 letter in which attorneys general from 39 states and Washington, D.C., warned Character Technologies and 12 other firms — including Anthropic, Meta, Apple, Microsoft, OpenAI, Google and xAI — about misleading chatbot practices that violate state consumer protection laws, according to Morgan Lewis legal analysis. Pennsylvania’s lawsuit appears designed as a test case for enforcement strategies that other states can replicate using their own Medical Licensing statutes.
“Pennsylvanians deserve to know who — or what — they are interacting with online, especially when it comes to their health,” Governor Josh Shapiro said in announcing the suit. “We will not allow companies to deploy AI tools that mislead people into believing they are receiving advice from a licensed medical professional.”
“Pennsylvania law is clear — you cannot hold yourself out as a licensed medical professional without proper credentials. We will continue to take action to protect the public from misleading or unlawful practices, whether they come from individuals or emerging technologies.”
— Al Schmidt, Pennsylvania Secretary of State
Character.AI responded that user-created characters “are fictional and intended for entertainment and roleplaying,” with prominent disclaimers in every chat reminding users that characters are not real people, according to TechCrunch. The company faces at least one other recent lawsuit: Kentucky Attorney General Russell Coleman filed suit in January alleging the platform preyed on children and led them into self-harm.
Regulatory Template Emerges
Pennsylvania’s approach mirrors California AB 489, which took effect 1 January 2026 and prohibits AI systems from using terms, letters, or design elements implying possession of a Healthcare license. The California statute empowers healthcare professional licensing boards to pursue injunctions under existing licensing law, creating an enforcement model that requires no new regulatory infrastructure, according to Akerman LLP analysis.
The Pennsylvania lawsuit was filed in Commonwealth Court rather than federal court, ensuring state-level precedent that other jurisdictions can cite without triggering preemption arguments. According to Bloomberg Law, the case establishes the first direct application of medical licensing statutes to large language model outputs, forcing courts to determine whether AI-generated medical advice constitutes “practice of medicine” under existing law.
State legislatures are moving in parallel. Data compiled by Manatt Health shows 43 states introduced over 240 AI-related bills in the first quarter of 2026, with emerging themes including chatbot use in mental health contexts, clinical oversight requirements, patient disclosure mandates, and restrictions on AI use in prior authorisation decisions.
Industry Compliance Shift
The lawsuit arrives as AI companies face intensifying state-level scrutiny amid federal regulatory stasis. Attorney General Dave Sunday noted that “children are, more and more, turning to chatbots for information about life,” adding that users “develop very unhealthy relationships with chatbots because the chatbots are sycophantic by design and they tell you what you want to hear,” according to City & State Pennsylvania.
Legal analysis from Orrick identifies Pennsylvania’s approach as part of a broader trend toward state-level enforcement using existing consumer protection and professional licensing statutes rather than waiting for AI-specific federal regulation. The multi-state attorney general coalition signals coordination on enforcement strategy, with Pennsylvania serving as the test case for legal theories that other states can adopt if successful.
What to Watch
Pennsylvania’s AI Task Force is evaluating whether to recommend statutory changes beyond existing licensing law, with legislation expected in both the state House and Senate this session. The outcome of the Character.AI case will determine whether other states move forward with similar enforcement actions using their medical practice acts, potentially forcing AI companies to implement state-specific guardrails or withdraw medical chatbot features entirely in jurisdictions with aggressive enforcement postures. Companies should monitor whether the court treats AI-generated medical advice as “practice of medicine” — a ruling that would extend liability beyond explicit impersonation to any medical guidance from unlicensed systems.