TikTok likely to be banned after President Biden signs law with 270-day sales deadline

For TikTok, time is starting to tick in its existential fight to avoid the US ban.

Legislation requiring Chinese owners of social media apps to divest passed through Congress as part of a larger foreign aid package that was passed by the Senate late Tuesday. President Joe Biden signed the legislation on Wednesday, starting a 270-day countdown to a sale of the popular video-sharing platform or a US ban.

TikTok and Beijing-based ByteDance have vowed to do everything possible to stop the measure. They have argued that it violates the free-speech rights of the app’s 170 million monthly US users and plan to file a lawsuit to strike down the law or at least delay its enforcement.

“We believe the facts and the law are clearly on our side, and we will ultimately prevail,” TikTok said in a post on Twitter on Wednesday.

Biden’s signature ends years of scrutiny in Washington, where regulators and lawmakers from both parties have expressed concerns that Chinese ownership of TikTok poses a threat to US national security. Supporters of the bill claim China’s government uses TikTok as a propaganda tool and could demand that ByteDance share US users’ data – allegations the company and officials in Beijing have denied.

As the legal battle unfolds, TikTok’s US users are facing a wave of uncertainty about where to express themselves through videos, make money as an influencer or sell goods on the TikTok Shop. If implemented, the TikTok ban would risk disrupting “an important channel for connecting with young audiences and building brand visibility”, said Damien Rollison, director of market insights at SOCI.

“TikTok’s unique format allows businesses to creatively showcase products and services while taking advantage of trends and user-generated content to connect with potential customers,” Rolison said.

TikTok has presented economic arguments against the law, saying that content creators and merchants who earn a living by posting videos and selling goods will suffer financially. While many US lawmakers who supported the newly passed federal bill think it will survive court review, some rights groups say the First Amendment will be a more difficult hurdle to overcome.

“The US government can say a foreign company can’t do business in the US – it’s even more difficult when the foreign business is a communications system that US users use to communicate with each other,” David Green, Citizen. Freedom Director of the Electronic Frontier Foundation said in an interview. “There are just different legal issues.”

When Montana passed a law in 2023 that would outlaw TikTok in the state, the company and a group of content creators sued in separate requests, saying the state measure violated the First Amendment of the U.S. Constitution. The rights of free expression under this have been violated. According to the New York Times, the company funded the users’ lawsuit. The judge reviewing the case blocked the ban before it could take effect.

ByteDance views a divestment of TikTok as a last resort, according to people familiar with the matter. Bloomberg has reported that TikTok’s parents hope to get a restraining order on the law, sparking a legal battle that could last more than a year.

“We will continue to fight,” Michael Beckerman, TikTok’s head of public policy in the US, said in a memo to US employees last week. “This is the beginning, not the end, of this long process.”

If TikTok can’t slow down enforcement through the legal system, the new administration may have another chance to avoid isolation. Biden, who signed the bill on Wednesday, has set the divestment deadline for Jan. 19 — the day before the inauguration of the next president.

Under the bill, Biden has the option to extend that deadline for an additional 90 days if he sees progress toward a sale. This would lead to a possible ban in the next presidential term.

Biden’s opponent in the November election, Donald Trump, has recently come out against the TikTok ban, saying it could give a boost to rival Meta Platform Inc. — which previously suspended Trump from its platforms. For Trump, this was a reversal from his decision to ban the app through a 2020 executive order while he was president, which was later struck down by federal courts.

The political sensitivity of targeting a social media platform popular among young users during a US election year was not lost on the bill’s supporters.

“This is not an effort to take away your voice,” Senator Mark Warner, a Virginia Democrat and chairman of the Intelligence Committee, said before Tuesday’s vote. “To young Americans, I want to say, we hear your concerns. We expect TikTok to continue under new ownership.

The passage is a significant blow to ByteDance in Washington, which spent $2.7 million in the first quarter on federal lobbying efforts after spending a record $8.7 million last year, according to congressional filings. TikTok Chief Executive Shaw Chew made a personal appeal on Capitol Hill in an unsuccessful attempt to suppress the legislation.

Meanwhile, the company spent more than $2 billion securing sensitive US user data with the help of Texas-based Oracle Corp to try to show that its platform is secure.

With the app again coming under regulatory and legal ambit, many TikTok users are not running away just yet. But those who make money on the app are reviewing their options.

Educational Insights, which owns the popular Knuddle puzzle game, has been using TikTok videos for several years to market its products. The company was one of the first merchants to join the TikTok Shop as part of an initial test before it officially went live.

“We’re definitely monitoring closely right now,” said Alyssa Weiss, senior marketing manager at Educational Insights. “We will be ready to move forward if needed, but right now, we are still actively implementing our TikTok plans.”

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