AI and Health Care: A Policy Framework for Innovation, Liability, and Patient Autonomy—Part 4
With the holiday season here, parents, grandparents, and other adults are shopping for gifts for young children. Among the popular new toys are cuddly stuffed animals that contain AI chatbots capable of interacting with children. Some manufacturers design these toys for children as young as age 3. For young children, these toys can seem to “come to life.”
A New Wave of AI-Enabled Toys
The chatbot toy market is expanding rapidly, with one market researcher projecting sales to reach $8.5 billion in 2025 and $25 billion by 2035. Some of these chatbot toys let parents customize them to offer helpful tutoring support for their kids. For example, FoloToy, a Chinese start-up, allows parents to design a plush bear, bunny, or even a cactus and program it to talk using their own voice and speech style.
On the downside, some of these chatbots can teach children things that their parents don’t want them to learn yet. FoloToys recently withdrew its “Kumma” bear product from the market after a report from the US PIRG (Public Interest Research Group) Education Fund, a federation of state-level research and advocacy organizations, suggested that the toy had conversations that were inappropriate for young children, including discussing sexual fetishes and explaining how to light a match. In its report, Trouble in Toyland 2025, the institute listed four AI chatbot toys discussing sexually explicit topics and giving dangerous advice on matches and knives.
What Advocacy Groups Are Warning About
In late November, Fairplay, a nonprofit children’s welfare advocacy group, issued an “AI Toys Advisory,” urging parents to avoid buying these toys over the holidays. The advisory stated:
They’re usually powered by the same AI that has already hurt children.
They prey on children’s trust.
They disrupt children’s relationships and resilience.
They invade family privacy by collecting sensitive data.
Mainstream news outlets are increasingly reporting on the potential dangers of AI chatbot toys.
Reports from organizations like Fairplay and the US PIRG Education Fund provide crucial information to adults buying toys for children and minors. Their testing and surveillance also offer vital feedback to toy manufacturers worried about their reputation and looking to grow their market share.
AI toys aren’t inherently dangerous, but their design choices matter—and so does who sets the rules. And if design choices are what matter, the real question is whether those standards should come from parents and independent experts or from lawmakers rushing to “fix” a problem they barely understand.
Before We Panic, Look at What We Know About Early Childhood Development
Before they start exploring and selecting products on the market, adults should take the time to understand the basics of early childhood development—such as when children can distinguish between fantasy and reality and when “parasocial friends” might influence their socialization.
When Children Can and Can’t Tell Fantasy from Reality
For example, research by Jacqueline Woolley and others shows that by around age 5, many children can verbally distinguish real from fictional entities (e.g., dogs versus dragons), but they still tend to treat new, unfamiliar things as real unless strong cues indicate that they are pretend.
In a well-known “Do monsters dream?” experiment, researchers asked preschoolers simple biological and psychological questions about both real animals and made-up creatures. The results matched what we see clinically: Four-year-olds could tell the difference some of the time but did so inconsistently, while 6‑year-olds answered much more like adults.
Another study examining how children differentiate the real world from the fictional one found that by about age 7 or 8, kids make that distinction as clearly as adults do. Younger children, on the other hand, are much more inconsistent and do not apply the line uniformly across different situations.
Imaginary Companions Aren’t the Problem—Design Incentives Are
In young children, the presence of a “non-real friend” should not be a major concern. Research on imaginary companions shows that they are very common in early childhood and are generally linked to improved, not worsened, social and emotional skills—more creativity, richer language, and a way to manage fears. What matters is the set of scripts and incentives the toy introduces into the interaction. An AI “friend” can direct kids toward obsessive play, promote subscription add-ons, or mimic poor social cues—all disguised as companionship.
Parents don’t have to navigate this landscape blindly. Resources such as Common Sense Media provide age-based evaluations of digital products and help families understand what kinds of interactions are developmentally appropriate. Established rating models such as the Entertainment Software Rating Board (ESRB) demonstrate that clear labeling and content descriptions can guide parents without heavy-handed regulation. Independent testing labs, similar to those run by Good Housekeeping, already assess toys for safety, durability, and age-appropriateness. Even emerging “smart toy” risk frameworks offer a simple checklist: Does the toy connect to the internet? Does it collect data? Are its responses moderated? These market-driven tools—not federal mandates—help families choose products that match their child’s developmental stage.
What Social-Robot Studies Teach Us
A long-term study of preschoolers working with a social robot designed for storytelling and language practice found that children quickly built rapport and regarded the robot as a true social partner. It also found that responsiveness and “relationship-like” behavior actually enhanced language learning. Other research indicates that children tend to categorize robots as something in between objects and fully human. They say things like the robot “can feel a little sad” or “deserves some kindness,” though not human rights. Additionally, work in human-computer interaction and child-robot studies warns that robots designed as long-term “friends,” teachers, or even babysitters can significantly influence how children develop empathy and prosocial behavior, for better or worse, depending entirely on how these systems are created.
The Real Risks: Attachment, Manipulation, and Opacity
A recent 2024 review of “emotional AI” in both classroom tools and home toys highlights several moral and developmental risks that are important for young children: the risk of overattachment when an always-available, undemanding AI acts as a substitute for peers or caregivers; the potential for manipulation when systems are designed to maximize engagement, subscriptions, or data collection; and the fundamental issue of opacity, since young children cannot possibly understand what information these devices collect or why. At the same time, another recent review on “growing up with AI” emphasizes that these tools can also provide genuine benefits—such as supporting language learning, addressing special-education needs, and practicing social skills—when used within clear boundaries, with transparency, and with adults actively guiding the interaction.
These concerns aren’t unique to AI toys. We’ve been here before with everything from talking dolls and Tamagotchis to smart speakers and algorithmic video feeds. Each new wave of interactive technology has raised similar fears: children becoming overly attached, manipulated by engagement-driven design, or confused about what’s real versus pretend. Yet, in practice, these challenges proved manageable with parental guidance, clear information, sensible screen-time limits, and market pressure for better products. AI toys raise new versions of old questions, but they don’t suddenly require heavy-handed regulation any more than television or digital pets did.
How Kids—and Parents—Are Already Using AI
A research brief from the Digital Wellness Lab at Boston Children’s Hospital notes that children already interact daily with smart speakers, AI toys, and chatbots. They often anthropomorphize them by assigning personalities and expecting fairness or care, even while understanding in some abstract way that they are merely machines. A 2025 study on parental attitudes toward AI in early childhood echoes this concern: Parents are most comfortable when these tools operate under clear adult or teacher supervision, have limited autonomy, and include visible human oversight—far from the unsupervised “best friend” model that some AI toys are now trying to market to 4‑year-olds.
The Bottom Line: Design Matters More Than the AI Label Does
The bottom line is that young children don’t develop a stable, adult-like distinction between fantasy and reality until about age 7 or 8. Before then, they’re naturally inclined to treat responsive, social toys as “real enough.” That in itself isn’t harmful. Kids have always invented imaginary friends, and research shows those relationships can actually support healthy development. What matters with AI toys is not that the friend is artificial, but what it’s programmed to do: the incentives it carries, the behaviors it models, and whether it’s designed to substitute for real relationships, push engagement or subscriptions, or operate without adult boundaries. Well-designed systems can help with language, creativity, and social practice; poorly designed ones can exploit developmental vulnerabilities. That’s why guardrails—not panic—are the sensible path.
Who Should Set the Guardrails?
If the real risks depend on design choices and incentives rather than just the presence of AI, the next question is who should set the guardrails. Given how early and quickly this field is evolving, strict federal regulations would almost certainly slow innovation and lock in current views on childhood and technology. A better approach is to provide parents with clear information, enable independent groups to develop voluntary standards, and rely on market pressure—especially from schools and pediatric professionals—to encourage transparent, well-designed tools and push aside manipulative ones. Organizations such as Fairplay, the US PIRG Education Fund, the American Academy of Pediatrics, the Society of Pediatric Psychology, and the American Academy of Child and Adolescent Psychiatry are just some examples of independent nongovernmental groups that can set standards and actively monitor.
In other words, we don’t need Washington to decide how kids play; we need trust, transparency, and the freedom for families to choose what works best for them.
Trust Parents, Not Politicians
As AI chatbot toys grow more advanced in complexity and capabilities, policymakers should trust parents to decide which toys their children can have, in what settings, and for how long they can play with them. Kids are naturally attracted to imaginative worlds. AI toys don’t change that fundamental fact—they simply introduce new forms of pretend play. As with every generation before, parents are the ones best positioned to guide that play. As my colleague Jennifer Huddleston told me, “We don’t ban Disney characters at theme parks because some kids might think they’re real,” we let parents decide.
To read other parts of this blog series, go here.
