Opening arguments begin Tuesday in Oakland federal courthouse in a landmark case that could reshape Meta — and test whether the advertising engine funding the company's massive artificial intelligence ambitions can survive an unprecedented legal assault.
The trial, co-led by California Attorney General Rob Bonta, involves a coalition of 29 state attorneys general who sued Meta in 2023 over allegations that Facebook and Instagram were designed to foster addictive behavior in children and teens. Lawyers representing California, Colorado, New Jersey and Kentucky will argue the case, after a jury was seated last week in Oakland. The states allege violations of the Children's Online Privacy Protection Act (COPPA) and various consumer protection statutes, according to CNBC.
Industry experts are calling it social media's "Big Tobacco" moment — a reference to the 1990s tobacco settlements that forced cigarette makers to pay billions and sharply curtailed their influence.
The Numbers Are Staggering
The potential financial consequences range from enormous to existential. Meta's own attorneys have previously said the consolidated state attorneys general trial could lead to damages as high as $1.4 trillion, according to CNBC. Lawyers representing the states told presiding federal Judge Yvonne Gonzalez Rogers last week that $200 billion is a more likely figure.
The stakes were underscored by New Mexico Attorney General Raúl Torrez, who spoke to CNBC fresh off a victory against Meta in his own state. "You could wake up with a headline judgment that is, as I've said, astronomical," Torrez said.
Earlier this month, Meta lost the New Mexico case, which will require the company to make changes to its services and pay nearly $1 billion. A jury there ruled in March, during the trial's first phase, that Meta must pay $375 million for violating the state's unfair practices act. The judge in New Mexico also ordered Meta to pay $567 million into an abatement fund as part of a second phase involving child sexual exploitation allegations. Meta said it disagreed with the ruling and plans to appeal.
"This is a state with some 2 million people," Torrez said of New Mexico. "If you map that same argument onto California or Florida or Texas or New York, I mean, that's a potentially massive and a market shifting force."
Why California Matters Most
"California matters more than any other jurisdiction in the U.S.," said Julia Powles, executive director of the UCLA Institute of Technology, Law and Policy. "It's where they are subject to the greatest legal reach, and it's a jurisdiction watched around the world."
A bad result in its home state could expose Meta to far steeper penalties than New Mexico did — and, more damaging still, force fundamental alterations to the algorithms that power Facebook and Instagram.
The case matters well beyond social media. Meta derives roughly 98% of its revenue from online advertising, and CEO Mark Zuckerberg is relying on that cash to fund his enormous bet on artificial intelligence, which could cost as much as $145 billion this year, CNBC reported. Any judgment that dents the ad business strikes directly at the AI strategy that Meta has staked its future on — from its open-weight model releases to its constellation-sized data center buildouts.
Dodging Section 230
The states' legal theory is notable for how it works around Section 230 of the Communications Decency Act, the law that has generally shielded tech platforms from liability for third-party content posted by users. Instead of targeting what users post, the attorneys general are focusing on the design of the apps themselves and alleged misrepresentations about safety.
"[It] really provides a blueprint for other states to hold them accountable," Torrez said.
The approach has already produced results. In the New Mexico case, Meta is being required to improve its "age assurance models and tools" using AI and to attempt to develop, within two years, a dedicated under-13 prediction model. Other remedies include easier reporting of underage accounts and a portal allowing school administrators to flag suspected underage users.
Meta and Google's YouTube also lost a separate case in March, when a Los Angeles jury determined the companies were negligent and failed to warn users about dangers associated with their platforms.
Meta's Defense
Meta has pushed back forcefully ahead of the Oakland trial. In a statement, the company said the attorneys general coalition's "limited claims are unsubstantiated and their financial demands are vastly disproportionate."
"The AGs offer no proof anyone in their states was misled, claim benign features like having an additional Instagram account somehow harmed their residents, and attempt to penalize Meta for industry-wide challenges like age verification," Meta said.
California's Bonta sees it differently. "Meta designed a dangerous product for young users, knew it to be dangerous, and then lied to children, families, and the community about how dangerous it was," he said in a statement last Monday. "We are ready to hold Meta accountable for its role in fueling the mental health crisis of American children and look forward to trial."
Money May Be the Least of It
Legal observers note that even a record judgment would flow mostly to governments, with the plaintiffs' bar taking a cut — while design changes ordered by a court could hurt far more.
"They have the ability that private plaintiffs typically do not have to actually force these companies, through the court system, to change their business model, their design decisions, all of that," said Laura Marquez-Garrett, an attorney with the Social Media Victims Law Center, during a Friday media briefing.
The states are seeking permanent injunctive relief on a nationwide, rather than state-by-state, basis, according to a court filing — meaning a loss in Oakland could rewrite how Facebook and Instagram operate for every American user.
For a company pouring more money into AI than any campaign in tech history, the message from Oakland is stark: the same algorithmic systems that drive engagement — and fund the AI race — are now on trial.
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