Social media giant Meta is facing a landmark trial that could impact its future.
Opening statements began on Tuesday in a US federal court case brought by 29 state attorneys general, who have accused Facebook and Instagram’s parent company of designing platforms to encourage infinite scrolling and keep their youngest users hooked, despite allegedly knowing they could fuel addictive behaviour. The company is also accused of collecting data on minors.
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The case is expected to last as long as six weeks. If the attorneys general get their way, the Silicon Valley-based tech company might have to make structural changes to its platform and pay as much as $1.4 trillion in fines.
While Meta denies the allegations, the potential consequences of this case could be significant for the company, which is already facing low employee morale, waves of layoffs and a series of lagging investments.
Significant financial impact
The potential exposure to Meta is significant. State penalties could reach as high as $1.4 trillion, Meta has said, although that is unlikely, as the coalition of states said it is seeking $200bn in damages.
To put that in context, the amount is roughly the equivalent of Meta’s revenue last year. In 2025, the tech giant generated nearly $201bn in revenue, and it had $83.2bn in operating income.
The $200bn ask is significantly higher than any penalty the company has had to face so far. In March, a jury in a separate New Mexico lawsuit ordered Meta to pay $375m in civil penalties, and another $567m was ordered by a judge earlier this month.
At the time of the March penalty, financial services firm Morningstar said it was not overly concerned about the impact of the looming court cases on Meta’s valuation, even if governments around the world use these cases as a reason to push for structural changes to the business.
“We think that any algorithmic changes imposed on the firm via legislation are also a manageable risk, given the firm’s monetizable user base, which is overwhelmingly adult, thereby insulating the firm against such legislation,” a Morningstar analyst note said.
While no one can predict which way the coalition case will go, Meta’s problems extend to concerns about significant financial exposure in some of its investments and business units.
For instance, Reality Labs, the division responsible for Meta’s virtual and augmented reality tools and software like the metaverse, has lost $70bn since 2020.
Meta has also ramped up spending to build out AI infrastructure as growing concerns about an AI bubble loom over the sector.
Cash flow for the business fell significantly, from $12bn in the first quarter to $784m in the second quarter, although it did not go into negative territory as some analysts had expected.
“I think it’s [Meta] in an unenviable spot, because it’s facing pressure from multiple fronts,” Aleksandar Tomic, associate dean for strategy, innovation, and technology at Boston College, told Al Jazeera.
“These verdicts are going to put pressure on their advertising business. The AI development seems to have stalled, and the virtual reality thing seems to be dead on arrival, at least for now. So the only bright spot is that they might be able to get into the AI infrastructure game, but that is no guarantee.”
Meta itself is worried about the financial strain. “There can be no assurances that a favorable final outcome will be obtained in all our cases, and defending any lawsuit is costly and can impose a significant burden on management and employees,” the company said in a January Securities and Exchange Commission (SEC) filing.
Can the lawsuit impact its core product?
While financial penalties might be a strain, a legal requirement to fundamentally alter the machinery that makes Instagram and Facebook so valuable to advertisers would be much harder for Meta to absorb.
The lawsuit calls for changes to its business model, including eliminating the infinite scroll that allows users to continually look at new posts. Meta’s advertising business is dependent on impressions, or the number of times a content appears on a user’s screen. The longer someone is on the app, the more impressions they can see.
“Our financial performance has been and will continue to be significantly determined by our success in adding, retaining, and engaging active users of our products that deliver ad impressions, particularly for Facebook and Instagram,” the company said in an SEC filing.
“User growth and engagement are also impacted by a number of other factors, including competitive products and services, such as TikTok, that have reduced some users’ engagement with our products and services,” the filing added.
In 2025, Meta reported 12 percent more advertisement impressions than in 2024, while the average price per advertisement jumped by 9 percent.
The plaintiff states want the company to make other changes, including getting rid of algorithms and AI models made from data compiled from minors. The states are also asking the court to compel the company to promote the wellbeing of its users and set time restrictions for its youngest consumers.
Meta has introduced features that have reminded teens of their time use on their platforms. In January 2023, it gave teens ways to manage the kinds of advertisements they could see on Instagram and Facebook. In June 2023, it introduced a feature to notify teen users that they have spent more than 20 minutes on the platform and to set daily time limits.
“We stand by our record of creating strong protections for teens, and look forward to making our case in court,” Stephanie Otway, a Meta spokesperson, told Al Jazeera.
But the lawsuit says that is not enough, alleging that teens could easily dismiss the notification and continue scrolling.
How will this impact future lawsuits?
Meta is currently facing lawsuits from more than 100,000 different parties, according to its SEC filings, including individuals, cities, states, and school districts around the US.
“These first few cases going out are really going to set the standard,” Tre Lovell, a Los Angeles-based media law and entertainment lawyer, told Al Jazeera.
Lovell predicted that, ultimately, there will be a combined settlement.
“We’re going to get close to some type of global settlement, a global resolution. I think, ultimately, that’s where this is going to end.”
Snap, TikTok, and Google’s YouTube have also faced litigation amid allegations that their products are built to encourage compulsive use by young people, Tomic told Al Jazeera. The claims could open the floodgates to the type of litigation that challenged the tobacco industry in the late 1990s, he said.
“This is the tobacco litigation of the information age. They [the plaintiffs in the Meta lawsuit] have identified this addiction component of social networks. Now that there is a judgement against Meta, I would be shocked if we don’t see everybody else getting sued, and once they get sued, it will be pretty much the same,” Tomic said.
In 1998, 46 states settled lawsuits with major cigarette makers over health costs and forced the companies to impose restrictions on advertising, especially targeting younger audiences.
