A federal lawsuit filed Thursday in the Washington D.C. Circuit Court of Appeals is putting the Trump administration’s handling of the TikTok ban under direct legal scrutiny. Two tech investors are arguing that the administration repeatedly violated a law passed by Congress and upheld unanimously by the Supreme Court, and that the deal eventually struck to keep TikTok operating in the United States does not come close to meeting the legal standard the law required.
The 33-page filing names two plaintiffs, one an investor in Alphabet, the parent company of Google, and the other an investor in Meta, the parent company of Facebook. Both companies compete directly with TikTok for users and advertising revenue, and both investors argue they suffered measurable financial harm when the administration blessed a TikTok deal they believe was unlawful.
TikTok and the law that was never truly enforced
The legislation at the center of the lawsuit gave ByteDance, the China-based parent company of TikTok, a firm deadline to divest from the platform or face a ban from American app stores. The Supreme Court upheld the law without dissent. The deadline passed on January 19, 2025, with no completed divestiture.
Rather than enforce the law, the administration issued a series of executive orders directing the Justice Department not to penalize the tech companies that continued hosting TikTok on their platforms. The law permitted a single 90-day extension, and only under the condition that meaningful progress toward a compliant deal could be demonstrated. The administration granted multiple extensions over the course of the year, a pattern the lawsuit characterizes as a sustained and deliberate violation of federal statute.
TikTok’s new ownership structure is at the heart of the legal challenge
In January 2026, a new American-based entity was announced to take over TikTok’s operations for United States users. ByteDance retained a 19.9 percent stake in the venture, landing just below the 20 percent ownership ceiling written into the law. On the surface, the structure appeared to satisfy the letter of the legislation. The lawsuit argues it does not.
The central objection focuses on the recommendation algorithm that determines what content TikTok users see. Under the announced deal, ByteDance retained ownership of that algorithm and would license it to the new American entity, which would be permitted only to retrain and update it using domestic user data. The law explicitly requires that TikTok’s American operations have no ongoing functional relationship with ByteDance, including any cooperation on content recommendation. The plaintiffs argue the algorithm arrangement makes that requirement impossible to satisfy.
TikTok investors in the deal have financial ties to the administration
The lawsuit raises a second layer of concern beyond the structural compliance questions. Several of the investors who participated in the new TikTok ownership arrangement have documented financial connections to the administration and to the president personally.
One major investor in the deal is a technology firm whose founder the president has publicly described as a personal friend, and whose property served as the site of a high-dollar political fundraiser years earlier. Other participants in the deal include financial firms whose leadership has contributed to political action committees aligned with the president. A Middle Eastern investment group involved in the transaction also entered a separate agreement last year to acquire a substantial position in a cryptocurrency venture linked to the Trump family.
The lawsuit frames these connections as evidence that the approved deal rewarded political allies rather than complying with the intent of the law.
TikTok’s legal future now rests with a federal appeals court
The lawsuit asks the court to formally declare that the administration’s multiple TikTok extensions were unlawful and that the ownership deal as structured does not satisfy the divestiture requirements Congress established. The lead attorney on the case works with an organization focused on holding government officials and corporate actors accountable for corruption through civil litigation.
The Department of Justice declined to comment on the filing. Several companies named in the lawsuit in connection with the ownership deal did not respond to requests for comment. TikTok itself also did not respond.
Whether the court agrees that the administration crossed a legal line will depend on how it interprets the gap between what the law required and what the deal actually delivered. That gap, the plaintiffs argue, is too wide to ignore.
