U.S. prepares law targeting fraudulent advertising on social media

Key points:

• Social media platforms in the U.S. could be required to verify all advertisers and be held accountable for fraudulent ads.
• Violations could lead to fines and investigations by the FTC and the SEC.
• The law is designed to protect users, especially from financial and cryptocurrency scams.

U.S. lawmakers are pushing a new bill called the Consumer Protection from Deceptive Advertising Act. Its goal is to reduce the spread of scam ads on social media and protect cryptocurrency users from financial fraud.

If passed, the law would require social media platforms to verify advertisers. Platforms that continue to run ads from anonymous or unverified accounts could face investigations by the Federal Trade Commission (FTC) or the U.S. Securities and Exchange Commission (SEC), along with significant penalties.

The bill was introduced by Senators Ruben Gallego and Bernie Moreno. It would require platforms to verify the identity of individual advertisers and confirm the legal status of businesses using official records. Simply paying for ads with a credit card would no longer be enough.

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Social media companies would also be required to provide easier ways for users to report fraud. Once a complaint is filed, platforms would be legally obligated to review it promptly and take action. Ignoring such reports would be treated as a violation of laws against unfair or deceptive business practices.

The initiative has already been backed by the American Bankers Association, the Bank Policy Institute, and consumer advocacy groups including AARP. They note that many financial scams originate on social media, and that older Americans are among the most frequent victims.

Regulators’ increased attention follows investigations into Meta. According to Reuters, the company may have generated a significant share of its revenue from ads linked to fraudulent schemes. Lawmakers argue that social media business models should not profit from misleading users, especially in the investment and crypto space.