ByteDance may shut down TikTok in U.S. after legal ban, report says

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ByteDance would rather shut down its video-sharing app TikTok than sell it to a U.S.-based company, according to a new report released by Reuters on Thursday.

The report says ByteDance would prefer to shut down its operations in the United States if it is unable to convince a federal court to block a newly enacted law that bans the app from American app stores unless ByteDance sells the service to a stateside company within the following year.

Last week, lawmakers in the House of Representatives rolled the so-called TikTok ban into a funding bill for military aid in Ukraine and Israel, essentially forcing their counterparts in the Senate to act on the measure.

Senators did just that, sending the bill to President Biden this week, who signed it into law on Wednesday.

The law requires ByteDance to sell TikTok to a stateside company within the next nine months, with a possible extension of 90 days if government officials think the company is making enough progress toward that goal.

If ByteDance refuses to sell, tech companies would be prohibited from offering the service in their app stores, essentially cutting off distribution.

The TikTok ban is now law, but is it legal?

For now, nothing has changed: TikTok is still available in the Apple App Store, Google Play Store, and other places, and the service is still operating.

Earlier this week, executives at ByteDance and TikTok said the company would file a legal challenge in federal court seeking to overturn the law.

As part of its legal challenge, it’s expected that ByteDance company will seek a preliminary injunction prohibiting the ban from taking effect while the case is being heard.

Similar efforts went ByteDance’s way: Last year, a federal judge blocked a near-identical state law banning TikTok while the court weighs a legal challenge brought by TikTok influencers and small business users there.

Proponents of the ban say TikTok collects a vast amount of user data, which ByteDance passes on to the Chinese government.

They claim that the data collection and sharing with Chinese government officials threatens homeland security and American users’ privacy, something ByteDance and TikTok deny.

Denials aside, the looming specter of national security prompted the Pentagon to ban TikTok on any devices used by Department of Defence contractors and employees.

Opponents of the measure say a ban on TikTok violates the company’s and its users’ First Amendment protections and specific federal laws intended to protect free trade and commerce.

The Reuters report on Thursday is the first sign that ByteDance is unlikely to comply with the law by selling TikTok’s U.S. operations if it fails in court.

Sources who spoke with the financial outlet said ByteDance considers TikTok’s discovery algorithm a core part of its product, one that it doesn’t want to share beyond the company.

According to Reuters, American users account for a relatively small part of TikTok’s overall business, and the app does not generate a financial profit for ByteDance.

If ByteDance shuts down its U.S.-based operation, it would have a limited impact on the company’s overall financial health, Reuters said.

Do you use TikTok and are worried about this legislation? Or maybe you don’t use it and worry about government overreach. Drop us a line in the comments below, or carry the discussion to our Twitter or Facebook.

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