TikTok sued the US government to block a ban. Here's what's happening now

TikTok Chief Executive Officer Shou Zi Chew testifies before a House Energy and Commerce Committee hearing titled “TikTok: How Congress Can Protect America's Data Privacy and Protect Children from Harm in line,” as lawmakers scrutinize Chinese-owned video-sharing app on Capitol Hill on Capitol Hill. Washington, March 23, 2023.

Evelyn Hockstein | Reuters

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

President Joe Biden signed a law 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 is in the works. The Protecting Americans from Apps Controlled by Foreign Adversaries Act, as it is called, passed with the support of both houses of Congress.

TikTok argues that the bill violates the First Amendment and that divestment is “simply not possible: neither commercially, nor technologically, nor legally,” according to the company's legal filing.

“For the first time in history, Congress has enacted legislation that subjects a single, named speech platform to a permanent nationwide ban and prohibits every American from participating in a single online community counting more than a billion people worldwide,” the lawsuit reads. said.

U.S. lawmakers have long argued that foreign ownership of TikTok poses a national security risk. Former President Donald Trump attempted to ban the platform through an executive order in 2020, paving the way for a possible ban. That effort failed, but the issue has grown in importance as concerns about China's increased power over the global state have intensified.

Before the law passed, TikTok spent more than $2 billion on an initiative called “Project Texas” aimed at better protecting U.S. user data from foreign influence. But lawmakers still continued to push to advance the legislation.

TikTok's success in its lawsuit, filed in the U.S. Court of Appeals for the D.C. Circuit, depends largely on how the courts handle the case. Is this a First Amendment issue or a national security issue?

“One of those really tough questions.”

The D.C. Circuit Court could agree to hear the case on an expedited timeline, meaning a full opinion could be issued before a sale is required, said Gus Hurwitz, principal investigator and academic director of the University of Washington Center for Technology, Innovation and Competition. Carey Law School of Pennsylvania.

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

“If the court doesn't put such a stay in place, I think it's a very bad sign for TikTok and ByteDance,” Hurwitz told CNBC in an interview. “This suggests 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 argument and, if courts view it that way, make it harder for Congress to win .

“This is one of those really difficult questions for both sides,” Hurwitz said.

Gautam Hans, a clinical associate professor of law at Cornell Law School, said courts take issues of speech suppression 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. “This law is, to my knowledge, quite unprecedented.”

It's also different from past attempts to ban TikTok since the bill has bipartisan support, which can influence the courts, Hans said. Regardless of what happens in circuit court, Hans said there is a real possibility the case could end up going to the U.S. Supreme Court.

“I don’t think this matter will be easily resolved,” Hans said.

Weigh a sale

ByteDance could simplify the process and agree to divest TikTok so that its majority owner is outside China. But the company reportedly said it would rather shut down TikTok in the United States 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 problem 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 kind of like you sell the house, but you take out all the windows and doors and who’s going to buy it?” Hans said.

Some buyers are nevertheless interested.

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 rebuilt within a year. But he said it would be a much tougher deal if TikTok spent six months of that period litigating.

“The best outcome would be if they agree to do a deal now and you have a year to rebuild the technology, which I think would be a major effort but could be done,” Mnuchin said.

Now TikTok can continue to operate. Hurwitz said the company showed little inclination to sell or cease operations in the United States until the last possible minute.

“It’s going to take time,” he said.

WATCH: Here's what you need to know about the TikTok lawsuit

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