AI Toys Raise Privacy Concerns as US Officials Call for Action on Data Risks

Federal officials and privacy advocates are raising alarms about the growing market of AI-powered toys and devices for children, citing significant data privacy concerns that could put sensitive family information at risk.

The warnings come amid the holiday shopping season as tech companies introduce a new wave of interactive toys equipped with artificial intelligence capabilities. These products, which range from talking teddy bears to robot companions, have the ability to record conversations, remember interactions, and adapt their responses based on collected data.

FTC Commissioner Alvaro Bedoya expressed serious concerns during a recent commission meeting, emphasizing that companies must be transparent about their data collection practices, especially when marketing to families with young children.

“Parents need to know exactly what information these toys are gathering about their kids and how that data will be used,” Bedoya said. “The responsibility falls on manufacturers to provide clear, understandable privacy policies—not buried in fine print, but prominently displayed before purchase.”

The issue extends beyond simple voice recordings. Many AI toys connect to cloud services where conversations and interaction data are processed, analyzed, and stored. This raises questions about who has access to this information and how long it remains on company servers.

Security researchers have identified several concerning vulnerabilities in popular AI toys over the past year. In one case, a smart doll was found to have security flaws that could potentially allow unauthorized access to stored voice recordings and personal information. The manufacturer issued a firmware update, but the incident highlighted the broader security challenges in the industry.

The Children’s Online Privacy Protection Act (COPPA) regulates how companies can collect data from children under 13, requiring parental consent and reasonable security measures. However, privacy advocates argue that these regulations haven’t kept pace with rapidly advancing AI technology.

“The current framework was designed for a different era,” said Emily Peterson, director of the Children’s Digital Rights Coalition. “AI toys can now build detailed profiles of children’s preferences, behaviors, and even emotional responses. The potential for misuse of this data is concerning, whether through targeted advertising or more problematic applications.”

Industry representatives maintain that AI toys offer valuable educational benefits and companionship for children. The Toy Association, a trade group representing manufacturers, stated that member companies prioritize children’s safety and privacy while developing innovative products.

“Our members adhere to strict privacy guidelines and security standards,” said Michael Thompson, spokesperson for the Toy Association. “The industry continues to evolve its best practices as technology advances, with many companies implementing privacy-by-design principles and minimizing data collection.”

Market analysts predict the global smart toy market will reach $24 billion by 2025, reflecting growing consumer demand despite privacy concerns. This rapid growth has prompted lawmakers to consider updated regulations.

A bipartisan bill introduced in Congress would require manufacturers to clearly disclose AI capabilities in children’s products and provide more robust parental controls. The proposed legislation would also mandate deletion of children’s data after a specified period unless parents explicitly opt for longer retention.

For parents navigating this landscape, experts recommend several precautions when considering AI-powered toys:

Review privacy policies and terms of service before purchase, focusing on what data is collected and how it’s used.

Look for toys that process data locally rather than sending it to cloud servers whenever possible.

Check if the toy can operate without an internet connection, which typically means less data sharing.

Research the manufacturer’s track record on security updates and privacy practices.

Consider whether the AI features justify the potential privacy tradeoffs.

“Parents shouldn’t have to be cybersecurity experts to buy safe toys,” said consumer advocate Robert Sanchez. “We need better regulations and industry standards to ensure that the burden doesn’t fall entirely on families.”

As the holiday shopping season continues, both regulators and privacy advocates are urging heightened awareness of these issues, with some calling for a “privacy-first” approach to children’s technology that prioritizes protection over features.