A bipartisan group of U.S. lawmakers introduced a legislation yesterday that would give Bytedance 6 months to divest TikTok or face a U.S. ban.
A White House National Security Council spokesperson welcomed the legislation adding that the Biden administration will work with Congress “to further strengthen this legislation and put it on the strongest possible legal footing.”
TikTok’s popularity could make it hard to pass the legislation in an election year.
A similar bill introduced last year has never been voted on.
The House of Representatives passes a bill that could lead to a nationwide ban of TikTok, unless it divests from its parent company within 180 days.
The Bill now proceeds to the senate, where its fate is uncertain.
Assessment
I initially underestimated this bill given the no-action on another related bill, Deterring America’s Technological Adversaries(DATA), which only gave President Biden the power to ban TikTok. But based on how swift the new bill was passed, it looks like it’s more superior than DATA. Also, the White House has asked the Senate to quickly vote on the bill, saying they will provide them with any needed technical assistance, with Biden saying he will sign the bill if it reaches his desk. This comes despite the Biden Campaign having a TikTok account. But I suppose the Biden administration is against anything supported by Trump. Recently, Trump said he was against TikTok ban since it would enable Meta Platforms to win.
Already, investors including former treasury secreatary Steven Mnuchin, OpenAI CEO Sam Altman and former Activision Blizzard CEO Bobby Kotick have expressed interest in buying TikTok.
However, I still conisider the posibility of a TikTok ban low (maybe 40%) given the public opinion and the fact that U.S is in an election year.
Though TikTok has vowed to fight the legislation in court, the uncertainty surrounding it has grown substantially and will likely put advertisers on edge. That would benefit the likes of Meta in the short-term.
TikTok is working on a US version of its algorithm source code a move that could enable it to operate independently of its Chinese parent and probably avoid a US ban, Reuters reported citing people familiar with the matter.
TikTok said the Reuters report is “misleading and factually inaccurate.”
I=5 Analysts expect the US Court of Appeals to rule against TikTok
The US Court of Appeals in Washington is set to rule on whether to uphold or overturn a law that requires TikTok to be divested by January 19 or face a ban in the US.
The bill received bipartisan support from the US senators in April and was assented to law by president Biden.
TD Cowen analyst Paul Gallant expects the court to uphold the ban while Bloomberg Intelligence litigation analyst Matthew Schettenhelm sees a 70% chance that TikTok will lose the appeal. Similarly, former DOJ official Alan Rozenshtein said in September that oral arguments indicated that TikTok could lose the case.
If TikTok loses the case, it could appeal it at the US Supreme Court, delaying the ban resolution. Also, Trump is expected to prevent a TikTok ban by ordering it to be divested though the company has said such a scenario is “not possible technologically, commercially, or legally” and that it will be “reduced to a shell of its former self.”
The US Court of Appeals ruling is expected by tomorrow.
I=9 Court upheld the law banning TikTok unless divested
Court upheld the law requiring TikTok to be divested or face a ban starting on January 19, as was expected by analysts.
The court’s decision could be appealed at the Supreme Court and president Biden could extent the dateline for a ban by up to 90 days, but only if there is progress in finding a buyer.
Jameel Jaffer, Executive Director of the Knight First Amendment Institute at Columbia University, said that if Trump determines that TikTok does not pose a national security threat and complies with legal standards, the courts are likely to listen to him and uphold his judgement. Trump could also ask congress to repeal the law.
In a March interview with CNBC, Trump sad he didn’t support the ban since it will drive users to Facebook, which he termed as the enemy of the people. But recently, Trump seems to have developed a liking for Mark Zuckerberg, together dining at Mar-a-Lago last week.
Noteworthily, Trump’s choice for Federal Communications Commission (FCC) chair, Brendan Carr, has been open about wanting TikTok to be banned. Other outspoken advocates for a TikTok ban are also joining Trump’s cabinet e.g. Mike Waltz (national security advisor appointee), Kristi Noem (head of Homeland Security appointee), Marco Rubio (secretary of state appointee).
However, Jeff Yass who donated $46 million to the Republicans during election is said to have a significant stake in ByteDance and could influence Trump’s decision.
Matthew Schettenhelm, Bloomberg law analyst said the Supreme Court is unlikely to block the law on an emergency basis and today’s ruling makes it hard for Trump to reverse the ban.
Assessment
Today’s ruling raises the probability that TikTok will be banned or divested. However, the ultimate decision lies on president Trump. Based on the fact that the bill received bipartisan support, cabinet appointees are mostly pro-TikTok ban, Zuckerberg’s new-found friendship with Trump, and ByteDance’s stance against divestiture, Trump could allow the law to take effect.
Good detailed overview. I thought for a second that we could bet on Polymarket on this topic but I think it’s not an easy bet because if Tiktok will be sold it also qualifies as “No”.
Do you have a strong opinion on the topic or do you see an opportunity here?
In general, for most bets on Polymarket, I think it’s not worth investing significant time into it because it will be hard to build a larger position due to the limited liquidity.
Current sentiments suggest a ban; however, given Trump’s unpredictability, I estimate a 60% probability of a ban, 30% for divestiture, and 10% for maintaining the status quo.
The low probability of a divestiture is because TikTok’s algorithm is core to ByteDance’s operations and lower revenue contribution from US. While the legislation allows TikTok to be sold without the algorithm, analysts believe that without the algorithm, there is no TikTok (min 2:00). In 2023, TikTok’s revenue was around $4.6 billion. In 2022, Europe accounted for 57% of the revenue while UK accounted for 22%. That means revenue from US is immaterial. Mitchell Green of Lead Edge Capital that has substantial stake in ByteDance confirmed this 8 months ago (min 0:20).
TikTok asks the Court of Appeals to delay the Jan. 19 ban in order to give the Supreme Court time to review the case.
The company lawyers argued that the Supreme Court is likely to reverse the recent court deliberations and that president Trump has vowed to prevent a ban.
The US Supreme court has agreed to hear arguments by TikTok against the law that seeks to ban the app from operating in US come Jan. 19 unless divested.
The Supreme court will hear oral arguments on Jan.10.
I=7 US Supreme Court leans towards upholding the law that will ban TikTok
The US Supreme Court is leaning towards upholding the law that will ban TikTok in Jan.19, unless divested.
However, the court could temporarily stop the ban even if it eventually rules against TikTok.
Recently, Trump filed a brief at the Supreme Court asking the justices to delay the ban so that when he takes office, he can find a political solution.
While Trump could refuse to enforce the ban and even ask congress to eliminate the ban through a new legislation, it could still be risky for app stores to restore TikTok if the law is still in the books. The possibility of pushing congress to come up with a new legislation could still be low given that the house had passed the bill overwhelmingly.
Some scholars argue that Trump could lift the ban without going through congress if he proves that TikTok is no longer under Chinese control.
Assessment
It looks like Trump’s options to save TikTok are limited. With the Supreme Court leaning towards upholding the law, the probability that TikTok gets banned is now higher than my earlier estimate of 60%.
I=5 Chinese officials weigh selling TikTok to Elon Musk
Chinese officials have internally discussed options to fend off a TikTok ban including the possibility of selling the company’s US operations to Elon Musk, people familiar with the discussions said.
According to the sources, the Chinese officials have not presented the contingency plans to Bytedance.
When asked about the report, a TikTok representative told The Wall Street Journal, “We cannot be expected to comment on pure fiction.”
The Chinese officials hope to use the discussions on TikTok to negotiate with Trump on his proposed tariffs.
I=4 RedNote, becomes the first beneficiary of potential TikTok ban
Chinese TikTok alternative, RedNote (known in China as Xiaohongshu) saw a surge in new years in the last few days as the day for a potential US ban on TikTok approaches.
U.S downloads of Rednote rose 200% y/y this week and 194% from the week prior, according to Sensor Tower estimates.
Some users said they joined the app to seek alternatives from Facebook or Instagram and X.