Federal appeals court upholds law requiring sale or ban of TikTok in the U.S.

A federal appeals court panel on Friday upheld a law that could lead to a ban on TikTok in a few short months, handing a resounding defeat to the popular social media platform as it fights for its survival in the U.S.

The U.S. Court of Appeals for the District of Columbia Circuit denied TikTok’s petition to overturn the law—which requires TikTok to break ties with its China-based parent company ByteDance or be banned by mid-January—and rebuffed the company’s challenge of the statute, which it argued had ran afoul of the First Amendment.

“The First Amendment exists to protect free speech in the United States,” said the court’s opinion, which was written by Judge Douglas Ginsburg. “Here the Government acted solely to protect that freedom from a foreign adversary nation and to limit that adversary’s ability to gather data on people in the United States.”

TikTok and ByteDance—another plaintiff in the lawsuit—are expected to appeal to the Supreme Court. Meanwhile, President-elect Donald Trump, who tried to ban TikTok during his first term and whose Justice Department would have to enforce the law, said during the presidential campaign that he is now against a TikTok ban and would work to “save” the social media platform.

Friday’s ruling came after the appeals court panel, composed of two Republican and one Democrat appointed judges, heard oral arguments in September. The three judges all denied TikTok’s petition. Judge Sri Srinivasan, the chief judge on the court who was appointed by former President Barack Obama, issued a concurring opinion.

The law, signed by President Joe Biden in April, was the culmination of a years-long saga in Washington over the short-form video-sharing app, which the government sees as a national security threat due to its connections to China.

The U.S. has said it’s concerned about TikTok collecting vast swaths of user data, including sensitive information on viewing habits, that could fall into the hands of the Chinese government through coercion. Officials have also warned the proprietary algorithm that fuels what users see on the app is vulnerable to manipulation by Chinese authorities, who can use it to shape content on the platform in a way that’s difficult to detect—a concern mirrored by the European Union on Friday as it scrutinizes the video-sharing app’s role in the Romanian elections.

However, a significant portion of the government’s information in the case has been redacted and hidden from the public as well as the two companies.

TikTok, which sued the government over the law in May, has long denied it could be used by Beijing to spy on or manipulate Americans. Its attorneys have accurately pointed out that the U.S. hasn’t provided evidence to show that the company handed over user data to the Chinese government, or manipulated content for Beijing’s benefit in the U.S. They have also argued the law is predicated on future risks, which the Department of Justice has emphasized pointing in part to unspecified action it claims the two companies have taken in the past due to demands from the Chinese government.

After the September hearing, some legal experts had said it was challenging to read the tea leaves on how the three judges would rule.

In a court hearing that lasted more than two hours, the panel appeared to grapple with how TikTok’s foreign ownership affects its rights under the Constitution and how far the government could go to curtail potential influence from abroad on a foreign-owned platform.

The judges pressed Daniel Tenny, a Department of Justice attorney, on the implications the case could have on the First Amendment. But they also expressed some skepticism at TikTok’s arguments, challenging the company’s attorney—Andrew Pincus—on whether any First Amendment rights preclude the government from curtailing a powerful company subject to the laws and influence of a foreign adversary.

In parts of their questions about TikTok’s ownership, the judges cited wartime precedent that allows the U.S. to restrict foreign ownership of broadcast licenses and asked if the arguments presented by TikTok would apply if the U.S. was engaged in war.

To assuage concerns about the company’s owners, TikTok says it has invested more than $2 billion to bolster protections around U.S. user data.

The company also argues the government’s broader concerns could have been resolved in a draft agreement it provided the Biden administration more than two years ago during talks between the two sides. It has blamed the government for walking away from further negotiations on the agreement, which the Justice Department argues is insufficient.

Attorneys for the two companies have claimed it’s impossible to divest the platform commercially and technologically. They also say any sale of TikTok without the coveted algorithm—the platform’s secret sauce that Chinese authorities would likely block under any divesture plan—would turn the U.S. version of TikTok into an island disconnected from other global content.

Still, some investors, including Trump’s former Treasury Secretary Steven Mnuchin and billionaire Frank McCourt, have expressed interest in purchasing the platform. Both men said earlier this year that they were launching a consortium to purchase TikTok’s U.S. business.

This week, a spokesperson for McCourt’s Project Liberty initiative, which aims to protect online privacy, said unnamed participants in their bid have made informal commitments of more than $20 billion in capital.

TikTok’s lawsuit was consolidated with a second legal challenge brought by several content creators—for which the company is covering legal costs—as well as a third one filed on behalf of conservative creators who work with a nonprofit called Based Politics Inc.

If TikTok appeals and the courts continue to uphold the law, it would fall on Trump’s Justice Department to enforce it and punish any potential violations with fines. The penalties would apply to app stores that would be prohibited from offering TikTok, and internet hosting services that would be barred from supporting it.