The future of TikTok is facing uncertainty after the social media company sued the U.S. government over a law that requires Chinese parent company ByteDance to sell the app or face a national ban. The legislation, signed by President Joe Biden in April, gives ByteDance nine months to find a buyer for TikTok, with a three-month extension if a deal is in progress. TikTok argues that the law violates the First Amendment and divestiture is not feasible. American lawmakers have raised concerns about TikTok’s foreign ownership, with former President Donald Trump attempting to ban the platform in 2020.
TikTok invested over $2 billion in a project called “Project Texas” to protect U.S. user data from foreign influence, but lawmakers continued to push for legislation. The lawsuit filed by TikTok in the U.S. Court of Appeals for the D.C. Circuit will likely depend on how the courts view the issue – as a First Amendment matter or a national security concern. The court could agree to expedite the case, with the possibility of a completed opinion before a sale is required. TikTok may request a stay of the law, which would put the legislation on hold pending a decision.
The issue presents a challenge for the courts, as it involves balancing freedom of speech with national security concerns. The courts have rarely dealt with such cases, and this law is considered unprecedented. The bipartisan support for the bill could influence the courts, and there is a possibility that the case may be elevated to the U.S. Supreme Court for resolution. ByteDance could potentially divest TikTok to comply with the law, but the company has indicated it would rather shut down the app in the U.S. than sell it. The transfer of TikTok’s algorithm, a critical technology for the app, poses a further complication to any potential sale.
Despite the challenges, there are interested acquirers for TikTok. Former Treasury Secretary Steven Mnuchin expressed interest in buying or investing in TikTok, suggesting that the platform could be rebuilt without the algorithm. However, a deal would be more difficult if TikTok spends time litigating the issue. TikTok can continue operating for now, with little indication of a sale or cessation of operations in the U.S. until the last possible moment. The situation is expected to unfold over a prolonged period, with potential implications for the future of the app.
