The Supreme Court upheld a US law that bans TikTok on Jan. 19 unless it is sold to an owner not controlled by a foreign adversary, a ruling that creates new uncertainty for a social-media app used by 170 million Americans.
The court in a unanimous decision sided with the US government’s argument that ties between TikTok’s parent ByteDance and the Chinese government presented a national security threat that empowered Congress to demand it be sold.
“There is no doubt that, for more than 170 million Americans, TikTok offers a distinctive and expansive outlet for expression, means of engagement, and source of community,” the court said.
“But Congress has determined that divestiture is necessary to address its well-supported national security concerns regarding TikTok’s data collection practices and relationship with a foreign adversary.”
TikTok had argued that it was entitled to First Amendment speech protections, but the court concluded the law did not violate those constitutional rights for TikTok or its users.
TikTok users outside the Supreme Court on Jan. 10. (AP Photo/Jacquelyn Martin) ·ASSOCIATED PRESS
Friday’s decision likely leaves the fate of TikTok in the hands of President-elect Donald Trump, who promised to “save TikTok” and had asked the nation’s highest court to suspend the divest-or-be-banned deadline. Trump takes office on Jan. 20.
Trump is reportedly mulling unconventional ways to save TikTok from an impending US ban, including an executive order that would push out enforcement of the new law by months. He said in a post today on Truth Social that spoke with Chinese President Xi Jinping about TikTok and other topics.
The executive order being considered by Trump, as reported first by the Washington Post and confirmed by other media outlets, would suspend enforcement of the TikTok law for 60 to 90 days.
The outcome of this blockbuster case will have dramatic implications for one of China’s most valuable technology companies, millions of American smartphone users, and some of the biggest social media companies in the US.
The court’s decision to uphold the ban could be a long-term boon for TikTok’s social media rivals by redistributing advertising dollars to platforms like Meta (META). In particular, Instagram could see a sizable uptick in advertiser dollars if TikTok bites the dust.
Meta CEO Mark Zuckerberg could benefit from a TikTok ban. REUTERS/Manuel Orbegozo ·REUTERS / Reuters
“In general, it’s a good thing for Meta,” William Blair research analyst Ralph Schackart told Yahoo Finance. “We estimate in a note potentially 60% to 70% of TikTok spend could move to Instagram and it monetizes at around 3x the rate of TikTok.”
YouTube and its Shorts platform should also gain from TikTok’s loss. According to Morgan Stanley managing director Brian Nowak, every 10% of the time users would have spent on TikTok that goes to YouTube would add $400 million to $750 million in ad revenue to the video platform’s sales.
What happens on your smartphone now that this US law banning TikTok is set to take effect on Jan. 19? It may depend on what TikTok parent ByteDance decides to do.
It could voluntarily shut down use of the app for U.S. users. Anyone trying to open the app would see a message sending them to a website offering an explanation about the ban, according to reports by Reuters and The Information.
TikTok’s lawyer hinted at this possibility last week when arguing his case before the Supreme Court.
On Jan. 19 “at least as I understand it, we go dark. Essentially, the platform shuts down,” TikTok’s lawyer said.
The TikTok app logo. REUTERS/Dado Ruvic/Illustration/File Photo ·Reuters / Reuters
But this is not necessarily what is required by law. A law upheld by the nation’s highest court, which only triggers a ban on Jan. 19 if the app has not been divested, enforces its ban in a different way.
The law states that it will no longer be legal for companies like Apple (APPL) and Google (GOOG, GOOGL) to allow users to download TikTok from their app stores, nor can cloud-storage companies like Microsoft (MSFT), Amazon (AMZN), and Oracle (ORCL) host the app.
Penalties for violations range up to $5,000 for each access provided to a US user.
Any executive order from Trump delaying enforcement of the law would create a new legal dilemma for these tech giants that are required by law to put the TikTok ban into effect.
Trump could ask his attorney general not to enforce the law — his nominee Pam Bondi didn’t commit to enforcing it when questioned by lawmakers this week. But Apple and Google still have to weigh whether that’s a risk they want to take.
There are less risky paths for Trump to take. He could push Congress to overturn the law or to encourage lawmakers to pass a law extending the Jan. 19 deadline. This week, Sen. Ed Markey did introduce a bill that would extend the deadline by 270 days, according to a statement.
He could also help find a buyer for the US operations, or even a piece of it, which would allow TikTok to avoid the ban. Chinese government officials, according to reports by Bloomberg and the Wall Street Journal, have discussed selling the US business to Elon Musk, the owner of X.
U.S. President-elect Donald Trump and Elon Musk watch the launch of the sixth test flight of the SpaceX Starship rocket last November in Brownsville, Texas. (Photo by Brandon Bell/Getty Images) ·Brandon Bell via Getty Images
The officials would prefer to keep TikTok under ByteDance ownership, according to the media reports, but have discussed the sale to Musk as among their contingency plans.
Antitrust experts predict that Musk could clear US legal hurdles imposed by a TikTok acquisition, which some estimate could amount to $40 billion-$50 billion. One reason is TikTok and X have distinct users.
There are other possible buyers, too. Investor and “Shark Tank” star Kevin O’Leary told Yahoo Finance last week that he and a consortium of business professionals led by billionaire Frank McCourt Jr. are willing to pay up to $20 billion for TikTok, calling it a “legacy opportunity.”
McCourt, the founder of internet advocacy group Project Liberty and former owner of the LA Dodgers, also recently expressed optimism about a potential deal on Yahoo Finance’s Opening Bid podcast.
“There’s a deal to be made here so that US TikTok can stay in business,” McCourt said. “We want to see the platform stay in business and the 170 million [US users] enjoy it.”
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.
