TikTok CEO Shou Zi Chew testified before a House Energy and Commerce Committee hearing titled “TikTok: How Congress Can Protect America’s Data Privacy and Protect Children from Online Harm” as lawmakers scrutinize the app for China-owned video sharing on Capitol Hill in Washington, D.C., March 23, 2023.

Evelyn Hochstein | Reuters

TikTok’s future is more uncertain than ever after the social media company sued the US government on Tuesday over a law that would force Chinese parent ByteDance to sell the app or face a nationwide ban.

President Joe Biden signed legislation in April that gives ByteDance nine months to find a buyer for the popular short-form video app, and a three-month extension if a deal goes through. The Protecting Americans from Apps Controlled by Foreign Enemies Act, as it’s known, passed with bipartisan support in both houses of Congress.

TikTok disputes that the bill violates the First Amendment and that the sale is “simply impossible: not commercially, not technologically, not legally,” according to the company’s legal filing.

“For the first time in history, Congress has enacted a law that subjects a single speech platform to a permanent, nationwide ban and prohibits any American from participating in a unique online community of more than 1 billion people worldwide,” the lawsuit said.

US lawmakers have long argued that foreign ownership of TikTok poses a national security risk. Former President Donald Trump tried to ban the platform through an executive order in 2020, paving the way for a potential ban. That effort failed, but the issue gained resonance as concerns about China’s increased power over the global state intensified.

Prior to the law’s passage, TikTok spent more than $2 billion on an initiative called Project Texas to better protect US user data from foreign influence. But lawmakers continued to push for progress on the legislation.

Whether TikTok succeeds in its lawsuit filed in the US Court of Appeals for the DC Circuit depends largely on how the courts treat the matter. Is it a First Amendment issue or a national security issue?

“One of those really hard problems”

The D.C. District Court may agree to hear the case on an expedited basis, meaning a completed opinion could be provided before a sale is required, said Gus Hurwitz, senior fellow and academic director of Center for Technology, Innovation and Competition in University of Pennsylvania Cary School of Law.

Hurwitz said TikTok and ByteDance will likely seek a stay of the law or a preliminary injunction from the court, effectively halting the law until a decision is made.

“If the court doesn’t impose such a stay, I think that’s a really bad sign for TikTok and ByteDance,” Hurwitz said in an interview with CNBC. “It’s an assumption that the court thinks the law has a very good chance of being upheld.”

TikTok could also file another lawsuit on behalf of its users, which Hurwitz said would strengthen the company’s First Amendment case and, if the courts see it that way, make it harder for Congress to prevail.

“It’s one of those really tough issues for both sides,” Hurwitz said.

Gautam Hans, associate clinical professor of law at Cornell Law School, said courts take speech suppression issues very seriously, but they also protect national security. He said the two priorities rarely conflict.

“These situations are relatively rare,” Hans said in an interview. “As far as I understand, this law is pretty unprecedented.”

It’s also different from previous attempts to ban TikTok because the bill has bipartisan support, which could sway the courts, Hans said. Regardless of what happens in district court, Hance said there’s a real possibility the case could reach the U.S. Supreme Court.

“I don’t think this case is going to be solved easily,” Hans said.

Former Treasury Secretary Steven Mnuchin on TikTok: We are interested in buying or investing in it

Weighing a sale

ByteDance could simplify the process and agree to sell TikTok so that its majority owner is outside of China. But the company has it is reported said it would rather shut down TikTok in the US than sell it. TikTok CEO Shou Chew said in a video about the app: “Make no mistake: this is a ban.”

Further complicating a potential sale is the issue with TikTok’s algorithm, which is a key piece of technology that allows the app to make recommendations to users. China would likely have to approve the transfer of the algorithm, a move experts don’t see happening.

“It’s like selling the house, but you take out all the windows and doors, and who’s going to buy it?” Hans said.

Still, there are interested buyers.

Former Treasury Secretary Steven Mnuchin told CNBC’s David Faber on Tuesday that he is still “very interested” in buying or investing in TikTok. He said that even without the algorithm, the platform could probably be restored within a year. But he said it would be much more difficult if TikTok spent six months of that period in court cases.

“The best outcome would be if they agree to make a deal now and you have a year to restore the technology, which I think would be a big effort, but it can be done,” Mnuchin said.

As of now, TikTok can continue to operate. Hurwitz said the company doesn’t show much inclination to sell or stop doing business in the U.S. until the last possible moment.

“It’s going to take some time,” he said.

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