NEW YORK, March 27, 2026, 10:16 (EDT).
Meta Platforms dropped another 2.4% by around 10 a.m. in New York, while Alphabet slipped 1.3% and Snap fell 4%, building on Thursday’s slide in social shares. The two big tech names are still reeling from a pair of U.S. jury defeats this week that have abruptly turned the child-safety controversy into a tangible legal threat for investors.
This is significant because the lawsuits focused on the architecture of the apps themselves—not just the content users see. Plaintiffs singled out features like infinite scroll, which keeps users constantly supplied with new content, as problematic design. That legal approach threatens to chip away at Section 230, the sweeping 1996 law that protects tech platforms from being held liable for what their users post. The Los Angeles suit now stands as a bellwether for thousands of related cases across California.
Already on shaky ground, the Nasdaq dropped 2.4% Thursday, pushing it just over the correction threshold and leaving it almost 11% off its October 29 peak. Investors pulled money from growth names, spooked by climbing oil prices and escalating tensions in the Middle East.
A Los Angeles jury handed down a $6 million verdict on March 25 to Kaley, 20, ruling Meta and Google were negligent in both their design of Instagram and YouTube and in not warning users about potential risks. The jury pinned 70% of the damages on Meta, leaving Google responsible for the other 30%. Snap and TikTok settled before trial kicked off.
Just a day ago, a New Mexico jury hit Meta with a $375 million penalty, concluding the company misled users on safety and allowed child sexual exploitation across its platforms. But things may escalate in May. The state is signaling it could push for court-ordered limits: dialing back recommendations to minors, reducing notifications, ramping up age verification, and putting brakes on endless feeds for children.
“These decisions don’t break the business model today, but they raise the range of outcomes around future cash flows and margin structure,” said Adam Sarhan, chief executive at 50 Park Investments, speaking to Reuters. Investors are responding to the underlying legal argument nearly as much as to the size of the damages bill. Reuters
Gregory Dickinson, law professor at the University of Nebraska, points out that “Courts are increasingly trying to distinguish claims about platform functionality or platform conduct from claims that would really just impose liability for third-party speech.” Gil Luria, technology analyst at D.A. Davidson, thinks the legal battle could stretch into appeals but still push for safeguards that “may dampen growth.” Reuters
The decisions landed with impact in Washington. Senators Richard Blumenthal and Marsha Blackburn argued the verdict bolsters support for the Kids Online Safety Act, as Senator Dick Durbin pressed again to phase out Section 230. Earlier in the month, the House Energy and Commerce Committee sent forward a set of online child-safety bills, one of them being the House’s own version of KOSA.
Meta plans to challenge both verdicts, highlighting features like default nighttime notification limits for teen users, age checks, and steps to block age-inappropriate content. Google, for its part, intends to appeal the Los Angeles decision as well.
Still, the outcome isn’t set in stone. No appeals court has weighed in on whether Section 230 covers design-based claims. Max Willens at eMarketer pointed out that it’s unlikely courts will force Facebook or Instagram to overhaul their core recommendation systems—even if judges end up mandating more limited adjustments.
This week’s slide feels like just the beginning. With another federal trial scheduled for June and a fresh California state case in July, Meta, Google, and even companies that have already settled—Snap and TikTok—remain in the legal spotlight, regardless of whether Friday’s stock decline lets up.
