Florida Enacts New Law Restricting Social Media for Kids Under 14, Triggering Industry Scrutiny and Legal Battles

The implications of Florida’s social media restrictions on tech giants like Meta, Snap, and potential challenges for tech ETFs

Florida Governor Ron DeSantis signed a groundbreaking bill on Monday aimed at curbing underage access to social media platforms, a move with far-reaching implications for tech companies and investors alike. The legislation, passed with bipartisan support, prohibits children aged 13 and under from using social media without parental permission, while mandating parental consent for users aged 14 to 15.

The law is expected to have significant ramifications for social media behemoths such as Meta Platforms Inc (NASDAQ:META) and Snap Inc (NYSE:SNAP), as well as for broader tech exchange-traded funds (ETFs) heavily invested in these companies.

The bill’s proponents cite rising concerns over the adverse effects of social media on adolescent mental health, including increased anxiety, depression, and addiction. They argue that platforms have not done enough to address these issues, pointing to features designed to maximize user engagement and addiction.

While the legislation does not explicitly name the affected companies, it targets platforms with addictive features and a substantial underage user base. These criteria include endless scrolling, push notifications, and a minimum of 10% of users under 16 spending at least two hours daily on the platform.

The law, scheduled to take effect on January 1, 2025, unless challenged in court, mandates the automatic deletion of accounts for children under 14 and imposes strict identity verification measures for age-restricted platforms.

Critics, however, warn of broader implications, particularly regarding online privacy and free speech rights. To enforce age restrictions, Floridians would be required to provide identification for internet access, raising concerns over data privacy and government overreach.

Tech industry lobby groups, including NetChoice, which represents major players like Meta, TikTok, and X (formerly Twitter), are expected to challenge the law in court. They argue that it infringes on constitutional rights and imposes undue burdens on online service providers and users.

Carl Szabo, Vice President of NetChoice, labeled the law “unconstitutional” and warned of its adverse impact on online speech and privacy rights. He criticized the legislation for compelling Floridians to surrender sensitive personal information or risk losing access to essential online services.

Florida’s move mirrors similar legislative efforts in other states like Utah and Arkansas, signaling broader regulatory scrutiny of social media platforms nationwide. The potential legal battles and regulatory challenges pose uncertainties for tech companies and ETFs with significant exposure to the social media sector.

Investors in tech ETFs, including Global X Social Media ETF (NASDAQ:SOCL) and others heavily invested in communication services, face heightened risks amid evolving regulatory landscapes and mounting legal disputes.

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