Matthew Schettenhelm, Bloomberg Intelligence Analyst, discusses Meta Platforms being sued by 41 states over addictive features in Instagram and Facebook that are harming the mental health of young people. Ann Lipton, business law professor at Tulane University, discusses how Instagram promoters are testing the limits of a 90-year-old securities law.
Meta Platforms is facing a federal lawsuit for intentionally designing addictive features that harm the mental health of young users on Instagram and Facebook.
There is a lack of clarity and consensus among circuits regarding the liability of social media platforms for misleading statements and the application of securities laws to crypto offerings.
Deep dives
Meta Platforms Sued for Addictive Features Harming Youth Mental Health
Meta Platforms, the parent company of Instagram and Facebook, is facing a federal lawsuit filed by 41 states for knowingly harming the mental health of young users. The lawsuit alleges that Meta intentionally designed its social media platforms to be more addictive to kids and young people, exploiting them for profit. Features like the addictive algorithm, constant flood of new content, and fear of missing out are said to monopolize the time and attention of young users. The lawsuit seeks damages, civil penalties, and changes in how the company serves teens.
Analyzing Liability of Social Media Platforms for Misleading Statements
The issue of determining liability for misleading statements made on social media platforms has created a split in the circuit. The interpretation of what constitutes a 'seller' of securities in the age of YouTube and Instagram is under scrutiny. The ninth and eleventh circuits have ruled that widespread social media campaigns urging people to purchase securities constitute solicitation and make the platforms liable. However, other circuits have maintained a requirement of direct contact or refused to broaden the definition of solicitation. The lack of clarity and consensus has led to uncertainty in applying securities laws to online platforms.
Challenges in Applying Securities Laws to Crypto Offerings
The realm of cryptocurrency offerings presents challenges in applying securities laws, specifically regarding registration requirements and liability. Crypto companies often resist registering their offerings due to the extensive disclosure requirements and strict liability associated with registration. Additionally, they argue that the current registration requirements do not suit the cryptographic context adequately. The lack of clarity and regulatory updates has resulted in the absence of alternative liability protections for crypto offerings, leaving shareholders to impose Section 12 liability, creating uncertainties and potential conflicts among different circuits.
Possibility of Supreme Court Intervention on Securities Law
The Supreme Court may be called upon to provide clearer guidance on securities law in the context of online platforms, particularly in cases involving social media and cryptocurrency. If there is a split among the circuits or if the legal dispute persists, the Supreme Court may step in to clarify the definition of solicitation and the liability of sellers. However, the Court's intervention is contingent upon the significance and frequency of such cases and the level of consensus reached among lower courts.
Matthew Schettenhelm, Bloomberg Intelligence Analyst, discusses Meta Platforms being sued by 41 states over addictive features in Instagram and Facebook that are harming the mental health of young people. Ann Lipton, business law professor at Tulane University, discusses how Instagram promoters are testing the limits of a 90-year-old securities law.