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U.S. lawmakers are attempting to pass a bill titled the Safeguarding Consumers from Advertising Misconduct Act, which, as the name suggests, aims to protect social media users from scam advertising.
If the bill is passed, platforms that fail to remove fraudulent advertisements or properly verify advertisers will be sued by the FTC or SEC.
How will the SCAM Act affect social media companies?
A bipartisan group of U.S. senators has introduced a bill, titled the Safeguarding Consumers from Advertising Misconduct Act, or the SCAM Act, aimed at stopping social media companies from profiting from fraudulent advertisements. It would force digital platforms to verify their advertisers or face heavy legal penalties.
The legislation was introduced by Senator Ruben Gallego, a Democrat from Arizona, and Senator Bernie Moreno, a Republican from Ohio.
Under the proposed SCAM Act, social media companies can no longer allow anonymous or unverified accounts to run commercial advertisements. The bill requires these companies to take “reasonable steps” to confirm that an advertiser is who they say they are.
Specifically, platforms must verify a government-issued identification for individual advertisers or confirm the “legal existence” of a business through official records.
Currently, many platforms allow advertisers to begin running campaigns with little more than a credit card, allowing bad actors to flood users’ feeds with fake investment schemes, “celeb-bait” ads, and fraudulent e-commerce stores.
The new law would also require platforms to create more effective tools for users and government agencies to report scams. Once a report is made, companies would be legally obligated to review and act on it promptly.
If a company fails to follow these rules, it would be treated as a violation of the FTC’s rules against “unfair or deceptive business practices.”
The American Bankers Association (ABA) and the Bank Policy Institute (BPI) both endorsed the act this week. They argue that while banks spend billions to stop fraud, they cannot stop scams that start on social media before the money ever reaches a bank account. Consumer advocacy groups like the AARP have also shown their support for the bill, noting that older Americans are often the primary targets of these digital financial crimes.
Why is the government targeting social media companies’ business models?
A Reuters investigation revealed in November 2025 that Meta’s internal staff expected to earn roughly 10% of the company’s 2024 revenue, about $16 billion, from advertisements for scams, illegal casinos, and banned products.
One report showed that Meta’s automated systems were programmed only to ban an advertiser if the system was 95% certain that fraud was occurring. If the system was “less certain” but still suspected a scam, the company reportedly charged the advertiser higher rates as a “penalty” rather than blocking them.
Additionally, internal documents from February 2025 showed that Meta managers were allegedly told not to take any anti-scam actions that would cost the company more than 0.15% of its total revenue, which amounted to about $135 million.
In late 2025, Meta disbanded a “China-focused anti-scam team” that had successfully reduced fraudulent ads from that region. After the team was shut down, reportedly at the direction of CEO Mark Zuckerberg, scam advertisements from Chinese agencies allegedly surged back to previous levels.
In response to these revelations, Senators Josh Hawley and Richard Blumenthal asked the FTC and the Securities and Exchange Commission (SEC) to launch formal probes into Meta’s advertising practices.
Meta has defended its record, stating that it aggressively fights fraud because scams drive away legitimate advertisers and users.
A Meta spokesman noted that in 2025, the company removed over 134 million scam ads and disrupted 12 million accounts linked to organized crime. Meta also highlighted its use of the “Fraud Intelligence Reciprocal Exchange” (FIRE), which allows it to share data with over 70 financial institutions to track scam tactics.
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