In the US, the writer holds the copyright as soon as the words are recorded in any medium (for example, paper, digital text, audio recording). It is only necessary to
register the copyright in order to sue somebody over it.
Even so, you only hold the copyright to the
expression of your ideas, not the ideas themselves. If he copies chunks of your novel word-for-word, then he's infringing on your copyright. If he's just using ideas, then there is no copyright involved.
Names of characters and titles of books can't be copyrighted. They can, however be tradmarked. I don't know enough about trademark law to comment, but unless you want to hire a lawyer and trademark your characters for some future line of action figures, animated features, etc., then there's not much you can do, especially if your "friend" is changing their names.
It seems to me that there are two things you should do.
1) tell your friend you are happy for him to use your ideas and characters, however they represent assets related to your writing and you want a percentage of whatever his profit (gross or net, you decide) is if he commercializes his games.
2) don't show him your writing or tell him anything else about it.
Disclaimer: I am not a lawyer and this is just my simple understanding of some very complex legal issues.
ETA: If he's doing this for academic credit, you can charge him with plagiarism.