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Two Verdicts in One Week
Meta Platforms (NASDAQ: META) shares tumbled over 6% on Thursday, March 26, following back-to-back court rulings that found the social media giant liable for harming young users .
In the first ruling, a New Mexico jury on March 24 ordered Meta to pay $375 million in civil penalties after finding the company willfully violated state consumer protection laws by misleading the public about child safety and failing to protect minors from predators on Facebook and Instagram . The verdict marked the first time a U.S. state has prevailed at trial against a major tech company over child safety claims .
Days earlier, a Los Angeles jury ruled that Meta and Google (YouTube) were negligent in designing addictive features that harmed a 20-year-old woman’s mental health, awarding $6 million in combined damages . The jury found both companies liable for creating platforms with features like infinite scroll that contributed to depression and suicidal thoughts .
Why Investors Are Worried
The financial penalties—$375 million and $6 million—are manageable for a company valued at roughly $1.5 trillion. But analysts warn the verdicts open the door to a “deluge of lawsuits” that could total billions and force fundamental changes to Meta’s business model .
The key legal shift: Both cases sidestepped Section 230 of the Communications Decency Act by targeting platform design, not third-party content . This playbook can now be used in thousands of similar cases already filed, including a high-profile trial set for July in San Francisco involving 30 state attorneys general .
“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 of 50 Park Investments . TD Cowen analyst Paul Gallant noted the rulings could push Meta to redesign its services for teens and explore financial settlements .
Market Reaction and Broader Context
Meta shares dropped more than 6% to around $554, extending a slump that began late last year . The stock is now down over 25% from its August 2025 record high of $796 . Other social media stocks fell as well: Snap slumped over 12%, while Reddit and Pinterest declined sharply .
The legal setbacks add to existing investor concerns over Meta’s massive AI spending, projected at up to $135 billion in 2026, and internal delays of its next-generation AI model .
What Comes Next
A second phase of the New Mexico trial begins May 4, where a judge will consider platform-wide changes, including age verification requirements and algorithm modifications . Meta plans to appeal both verdicts, but the legal battle is likely to stretch for years .
“We respectfully disagree with the verdict and will appeal,” a Meta spokesperson said .
