😱👨⚖️ TikTok Sues Montana Over Ban
Happy Wednesday all,
We just uploaded a new video to the channel on five assets safer than cash! It’s linked at the bottom of the newsletter so definitely give it a watch after reading. This week, we discuss the TikTok ban in Montana and include a brief legal overview.
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Enjoy this week’s Hump Days!
- Humphrey, Rickie & Tim
The Weekly Brief
No Signs of Progress from White House, Republicans in "Tough” Debt Ceiling Talks (Reuters)
The Biden Administration and congressional Republicans ended another round of debt ceiling talks on Tuesday with no signs of progress. Democrats argue that wealthy Americans and businesses should pay more taxes while Republicans argue for spending cuts. The lack of clear progress weighed on the market with U.S. stocks falling on Tuesday and Wednesday.
Why Does It Matter?
Any deal agreed on by Biden and McCarthy could take a week to pass through a Republican majority House (222-213) and Democratic Senate (51-49). The June 1st deadline is nearing, but many Republicans are skeptical of how firm the deadline is.
U.S. Growth Touches Fastest Monthly Rate in More Than a Year (WSJ)
U.S. economic activity rose in May to the highest pace in 13 months led by the service industry, which reported stronger demand for travel, dining out, and other leisure activities. A cooling manufacturing industry offset the bump by the service industry.
Why Does It Matter?
According to experts, while the service provider industry saw growth, manufactures struggled with overfilled warehouses as spending diverted from goods to services. As we near the next Fed meeting, officials look for signs of weakening demand as they work toward the 2% inflation target; the strong service sector data complicates matters.
Microsoft Beefs Up ChatGPT and Bing in Wide-Ranging AI Product Launch (Reuters)
Microsoft made available to users a host of AI upgrades to ChatGPT and Bing including the rollout of live search results from Bing to ChatGPT. The AI chatbot can now pull from Bing web results for paid subscribers and will do so soon for free users. Microsoft is also expanding plug-ins for Bing as part of an effort to capture more of the $286B market for search advertising.
Why Does It Matter?
The live search feature is a major development and cements ChatGPT well above its competitors. While previously the AI chatbot was only able to source information as of 2021, the new update opens the floodgates for what ChatGPT can pull upon.
Hump Days Scoop
Last week, Governor Greg Gianforte signed a bill banning TikTok, saying he wants to protect the state’s residents’ private information from being compromised by the Chinese government. While other countries such as Canada, Australia, and France have banned the app on government devices, Gianforte’s decision to outright ban TikTok in his state is the first of its kind in the U.S.
The ban goes into effect on Jan. 1, 2024, but TikTok has already sued the state of Montana alleging that the ban violates the U.S. Constitution. This week, we go over what exactly was included in Senate Bill 419 and give a brief overview of the legal challenges the state faces in trying to uphold the ban.
What was included in the bill to ban TikTok?
Last December, Gianforte banned TikTok on government devices as many others did before him. Then, last Wednesday, he added that the ban would expand to include “all social media applications that collect and provide users personal information or data to a foreign adversary.”
The law would bar TikTok from operating within Montana and forbid app stores like the Google Play Store and the Apple App Store from making TikTok available to download within the state. TikTok and app stores would be liable for fines of $10,000 a day for violating the law, but individual TikTok users would not be punished.
Shortly after lawmakers passed the bill, Gianforte wanted to broaden the legislation to apply to all social media apps that provide data to foreign adversaries. Still, there was not enough time to send it back to lawmakers but Gianforte, in a memo, listed examples of such apps, including WeChat, to be barred on state equipment in Montana.
What legal precedence is there for Montana’s outright ban on the app?
TikTok, on Monday, filed a suit against the state of Montana alleging that the ban is unconstitutional, violating the First Amendment.
However, supporters of the Montana bill say there is legal precedence to support the ban.
The First Amendment prohibits any law that limits freedom with respect to free speech, among other things but it is not black and white. National security is ground for the government’s attempt to regulate speech. Two cases outline a path for this law to pass through the courts, outlined below.
In 2010, following the 9/11 attack, the U.S. Supreme Court upheld a federal law banning “material support” for foreign terrorist organizations. The “material support” included financial support, training, expert advice, as well as entirely legal activities such as instructing terrorist groups on the peaceful use of international law, as was the case of retired U.S. administrative law judge Ralph Fertig. Arguments were made to the Supreme Court that this violated free-speech rights, but the court ruled in favor of national security.
In 1986, the Supreme Court upheld an order to close down an adult bookstore that facilitated prostitution, which the bookstore claimed violated the First Amendment. The Supreme Court ruled not on the content of the bookstore but rather on its conduct.
Applying the precedence to the current case, it is up to the courts whether they view Montana’s law as regulating TikTok’s conduct or speech. On the topic of national security, the U.S. government has not pointed to any direct evidence of the Chinese government leveraging TikTok to spy on American citizens, according to the ACLU. The state has only offered vague speculation on how American data might be used.
Montana has an uphill battle to uphold the new law, but it will come down to the court's interpretation of the law, what the state is regulating, and to what extent the popular app poses a risk to national security.
Chart of the Week
According to the National Federation of Independent Business (NFIB) survey, small business sentiment in the United States has declined to its lowest level since January 2013. This drop in sentiment is primarily attributed to weaker sales revenue and a pessimistic economic outlook. Falling sentiment among small businesses is concerning as it indicates a decreased likelihood of spending.
A Bank of America Small Business Owner Report revealed that almost half of business owners are reevaluating their cash flow and spending in response to the declining sentiment.
The NFIB survey also shows that only a small percentage of small business respondents have plans for capex in the next few months, marking the lowest reading since November 2012, excluding the significant dip experienced in April 2020 due to the COVID-19 pandemic. This pullback in spending by small businesses could have broader implications for the overall economy, as small businesses play a vital role in job creation and economic growth.
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