Meta CEO Mark Zuckerberg is seen at the U.S. Capitol after a meeting in the office of Senate Majority Leader John Thune, R-S.D., March 26, 2026.
Tom Williams | CQ Roll Call, Inc. | Getty Images
If New Mexico had made the plan to take over MetaCalifornia could decide the company’s fate when it comes to key changes at Facebook and Instagram.
Opening arguments begin Tuesday in the trial of California Attorney General Rob Bonta, who is jointly pursuing Meta after a litany of allegations that the company promoted addictive behavior among teenagers and children. The jury met last week at the federal courthouse in Oakland.
The trial involves a coalition of 29 state attorneys general in a unified case against Meta, filed in 2023 and represented by attorneys representing California, Colorado, New Jersey and Kentucky. The stakes are enormous as top government officials across the country push for Meta to be held accountable for alleged violations of federal and state laws, including the Children’s Online Privacy Protection Act (COPPA) and various consumer protection laws.
Industry experts are calling it social media’s “Big Tobacco” moment, with meta at the center. In the 1990s, tobacco companies were forced to pay billions of dollars for misleading the public about the safety and potential dangers of their products, and as a result saw a dramatic decline in their power and influence.
Earlier this month, Meta lost a case in New Mexico that would force the company to make some changes to its services and pay nearly $1 billion. But California wields such power and influence that a poor result in Meta’s home state could lead to much steeper penalties, including a broader overhaul that forces fundamental changes to key algorithms.
“California is more important than any other jurisdiction in the United States,” said Julia Powles, executive director of the UCLA Institute for Technology, Law and Policy. “That’s where they have the greatest legal reach and it’s a jurisdiction that’s being watched around the world.”
New Mexico AG Raúl Torrez, fresh from his court victory, told CNBC that the consequences could be “astronomical” for a company that gets 98% of its revenue from online advertising. Meta CEO Mark Zuckerberg is relying on revenue from the company’s dominant advertising business to fund his massive investment in artificial intelligence, which could cost as much as $145 billion this year.
A judge in New Mexico ordered Meta to pay $567 million into a compensation fund as part of a second phase of a trial over allegations of child sexual exploitation. A jury there decided in March in the first phase of the trial that Meta must pay $375 million for violating the state’s unfair practices law. Meta said it disagrees with New Mexico’s ruling and plans to appeal.
Torrez called it a “pretty large ruling” but was quick to note that it pales in comparison to what could come.
“This is a state of about two million people,” Torrez said. “If you apply the same argument to California, Florida, Texas or New York, that is a potentially huge and market-changing force.”
Avoiding Section 230
While the specific details of the cases vary, they all revolve around the allegedly harmful design of apps like Facebook and Instagram.
In New Mexico, Meta will improve “age security models and tools” using AI and seek to “develop a dedicated predictive model for under-13s within two years.” Other mitigations include making it easier to report usage by minors and working “with schools or a child safety organization to create a reporting portal where school administrators can report suspicious accounts on any social media platform where users may be under 13 years old.”
Torrez said the plaintiffs’ focus on app design features and alleged security misrepresentations “actually provides a blueprint for other states to hold accountable.” It’s an approach that allows states to bypass Section 230 of the Communications Decency Act, which generally protects tech companies from legal exposure due to third-party content on their platforms.
Meta and Googles YouTube lost a case in March when a jury in Los Angeles found the companies were negligent in failing to warn users about the dangers of using their platforms.
California Attorney General Rob Bonta speaks at a press conference in February 2024.
CNBC
Bonta, who was appointed to the AG post by Gov. Gavin Newsom in 2021, said in a statement last Monday that one of his most important duties is to “protect our children from harm.”
“Meta created a dangerous product for young users, knew it was dangerous, and then lied to children, families and the community about how dangerous it was,” he said. “We stand ready to hold Meta accountable for its role in exacerbating the mental health crisis facing American children and look forward to trial.”
Meta said in a statement that the AG coalition’s “limited claims are without merit and its financial demands are completely disproportionate.”
“The AGs provide no evidence that anyone in their states was misled, claim innocuous features like having an additional Instagram account somehow harmed their residents, and seek to punish Meta for industry-wide challenges like age verification,” Meta said.
Meta’s lawyers have previously said the consolidated prosecution case could result in damages of up to $1.4 trillion. Lawyers representing the states told Chief Federal Judge Yvonne Gonzalez Rogers last week that $200 billion was a more likely amount.
“You could wake up to a headline verdict that, like I said, is astronomical,” Torrez said.
Michael Coffey, a defense trial attorney and founding partner at New York law firm Coffey Modica, said it was the type of case that could define a prosecutor’s career, while victims could end up receiving very little of the eventual payout.
“It’s all going to go to the government, and then they’re going to distribute it, and then the plaintiffs’ bar will get a portion of it,” Coffey said.
Money aside, the potential design changes Meta would have to implement if it loses in California could be far more damaging, said Laura Marquez-Garrett, an attorney at the Social Media Victims Law Center.
“They have the ability to have private plaintiffs typically not have to go through the court system to force these companies to change their business model, their design decisions, etc.,” Marquez-Garrett, who worked on the recent case in Los Angeles, said during a media briefing Friday.
Prosecutors said in a court filing that they are seeking “permanent injunctive relief on a statewide – rather than federal – basis” to curb Meta’s unlawful actions and practices for any COPPA-related violations. If Meta is found to have violated federal law, states would require the company to delete all personal information from children under 13, as well as the “algorithms and models” trained using that information.
Regarding possible violations of state consumer protection laws, attorneys for the states said in the lawsuit that they wanted Meta to be forced to remove “certain addictive design features,” including infinite scrolling, autoplay, ephemeral content, beauty filters and “engagement-optimized algorithms.”
Torrez acknowledged that his team didn’t get all the design changes they sought, such as: B. eliminating infinite scrolling and changing the company’s recommendation algorithms. The judge in the case said some of these changes could conflict with the protections of Section 230 and the First Amendment and that enforcing them would be unfair because competitors like TikTok and YouTube would still retain the features.
Torrez said he plans to address the legislative process with a bill on social media and updates to the consumer protection law aimed at covering “a full range of business practices common in the digital economy.”
There are numerous other lawsuits pending against Meta and its social media competitors across the country, including a major federal trial expected to begin next year in Northern California that will involve a number of school districts. The first of several consolidated school district attempts was scheduled to begin this summer, but Meta, YouTube, TikTok and Snap everything cleared up.
The way Torrez sees it, Wall Street is underestimating the potential significance of a loss in California and is only looking at New Mexico “in isolation.” Meta stock is down 11% this year, but most of the concerns raised by analysts have to do with the company’s massive capital spending on AI infrastructure rather than fears about possible deterioration in its advertising business.
“The analysts are not evaluating this correctly at this point,” Torrez said. “This ruling in California alone could be gigantic enough that it changes this company’s ability to do what it needs to be funded in the future.”
REGARD: The federal lawsuit against Meta is moving forward for violating children’s privacy laws.
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