Montana’s state-wide ban on TikTok blocked by federal judge (NASDAQ:META)

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Montana was set to become the first state in the nation to ban TikTok, which is owned by the Chinese tech giant ByteDance (BDNCE), but it looks like the move is running into familiar roadblocks. Federal Judge Donald Molloy has blocked the bill set to go into effect on Jan. 1, 2024, saying the measure “violates the Constitution in more ways than one” and “oversteps state power.” While individual users would not have been punished, the law could have imposed fines of $10,000 on any “entity” – namely the app stores of Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL), or TikTok itself – each time someone was “offered the ability” to access or download the TikTok app.

Preliminary injunction: “Despite the State’s attempt to defend SB 419 as a consumer protection bill, the current record leaves little doubt that Montana’s legislature and Attorney General were more interested in targeting China’s ostensible role in TikTok than with protecting Montana consumers,” Judge Molloy wrote in the 48-page filing. “While there may be a public interest in protecting Montanan consumers, the state has not shown how this TikTok bill does that. This is especially apparent in that the same legislature enacted an entirely separate law that purports to broadly protect consumers’ digital data and privacy. Users are [also] deprived of communicating by their preferred means of speech, and thus First Amendment scrutiny is appropriate.”

Response from Montana: “The judge indicated several times that the analysis could change as the case proceeds and the State has the opportunity to present a full factual record. We look forward to presenting the complete legal argument to defend the law that protects Montanans from the Chinese Communist Party obtaining and using their data.”

Response from TikTok: “We are pleased the judge rejected this unconstitutional law and hundreds of thousands of Montanans can continue to express themselves, earn a living, and find community on TikTok.”

Former President Donald Trump already sought to ban TikTok and force a sale of its U.S. business to an American company, and while a transaction with Oracle (NYSE:ORCL) almost went through in 2020, the lawsuits piled up and an injunction was granted to prevent the app from being outlawed. The Biden administration later revoked the planned ban, ordering a national security review in its place, but Chinese tensions and data privacy concerns eventually swept both sides of the aisle and led to a notable House hearing in March. However, Congress has passed a bill to outlaw TikTok on federal devices, as well as a probe from CFIUS, while there has also been proposed legislation to ban the app in the U.S. (note that all American social media networks are blocked in China).

Go deeper: When things heated up earlier this year, many SA analysts commented on how restrictions on TikTok could impact rivals like Instagram Reels (NASDAQ:META), YouTube Shorts (GOOG) (GOOGL) and Snapchat Spotlight (NYSE:SNAP). “This ban, if it materializes, is more about tomorrow than today for the likes of Meta Platforms,” wrote Tradevestor, in an article entitled, What A TikTok Ban Could Mean. Others, like Bluesea Research, explored what competition or a ban would mean for Google (see Global Trends Provide A Massive Tailwind), as well as Julian Lin, Investing Group author of Best Of Breed Growth Stocks, on what effects the developments were having on Snap (read Risks Are Rising But Stock Is Cheap).