On Friday, TikTok has lost its fight to block a law that could result in its ban in the United States.
The ruling, delivered by a U.S. appeals court on Friday, upheld the legislation requiring the platform to sell to a non-Chinese owner or face being removed from U.S. app stores by January 19, 2025, CNN reports.
Failure to comply could lead to significant penalties for companies hosting TikTok on their platforms.
Social media stocks Facebook and Instagram parent Meta Platforms, Inc (NASDAQ:META), Reddit, Inc (NYSE:RDDT), and Snap Inc (NYSE:SNAP) surged on the reports. Meta Platforms stock hit its all-time high of $629.90 on the news, and Reddit hit an all-time high of $159.83 at the time of writing.
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The court rejected TikTok’s argument that the law violated constitutional protections, including the First and Fifth Amendments. The judges found no evidence that the law infringes on free speech or equal protection rights.
This ruling brings the platform closer to a potential ban unless TikTok’s parent company, ByteDance, agrees to sell the app to a new owner. TikTok is expected to appeal the decision.
President Joe Biden signed the law in April 2024 and mandates that TikTok must be divested from Chinese control to address concerns over national security.
U.S. lawmakers have expressed fears that the Chinese government could use the platform for surveillance or to spread propaganda. TikTok sued the government in May, claiming that the law targeted the platform unfairly and violated the rights of its over 170 million American users.
During the appeals process, government attorneys argued that TikTok’s algorithm, controlled by ByteDance, could influence U.S. users. In their ruling, the judges acknowledged that TikTok fosters free expression among American users but emphasized that the government’s concerns about national security outweighed these freedoms.
Recent reports indicated President-elect Donald Trump could halt a potential U.S. ban on TikTok, as promised during his campaigns.
Meanwhile, Amazon.Com Inc’s (NASDAQ:AMZN) boosting of relations with TikTok sparked speculation of a takeover. Earlier in 2024, venture capitalist Kevin O’Leary expressed his desire to snap TikTok.
ByteDance’s valuation has already reached $300 billion backed by its share buybacks.
Needham analyst Laura Martin had valued TikTok higher than Instagram Reels and Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) YouTube Shorts based on revenue, active users, and engagement measures.
Price Action: META stock is trading higher by 2.67% to $625.19 at the last check on Friday.
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