Snap Inc. (SNAP) is locked in a legal battle with New Mexico Attorney General Raúl Torrez, who alleges the social media giant’s platform facilitates child exploitation. The lawsuit, filed earlier this year, claims Snapchat’s features, particularly its disappearing messages, enable the spread of exploitative material, violating state laws. Torrez argues Snap prioritizes profit over the safety of its young users, a claim backed up by what the Attorney General’s office says is compelling evidence found in Snap’s internal documents.
However, Snap has filed a motion to dismiss the lawsuit, arguing that the Attorney General’s claims are based on misinterpretations of internal documents and the results of a flawed investigation. Snap contends that the New Mexico Department of Justice created a decoy account that proactively sought out inappropriate content, thereby skewing the findings. The company vehemently denies prioritizing profits over safety, highlighting its compliance with federal law mandating the reporting of child sexual abuse material (CSAM) to the National Center for Missing and Exploited Children. Snap insists that its internal policies and reporting mechanisms align with legal requirements.
The clash highlights the ongoing tension between social media companies and regulators regarding child safety. The New Mexico Department of Justice, in its response to Snap’s motion, accused the company of deflecting attention from the harm caused to children on its platform, asserting that the evidence clearly shows a prioritization of profit over safety. The Department emphasized the urgent need for stricter safeguards to protect young users from the dangers of online exploitation.
Snap’s defense also rests on the contention that the lawsuit conflicts with federal protections afforded under Section 230 of the Communications Decency Act, which shields online platforms from liability for user-generated content. Furthermore, the company argues that proposed age-verification mandates could infringe upon First Amendment rights. Snap clarifies that its safety-related statements are aspirational goals and not legally binding guarantees of absolute risk elimination. This legal strategy mirrors that of other major social media companies facing similar scrutiny, including Meta Platforms (Facebook and Instagram), X (formerly Twitter), and TikTok.
This legal battle arrives amidst a period of robust financial performance for Snap. The company reported impressive third-quarter results, exceeding analyst expectations with a revenue of $1.373 billion (compared to the consensus estimate of $1.358 billion). Adjusted earnings per share reached 8 cents, surpassing the 5-cent analyst prediction. Daily active users grew by 9% to 443 million, demonstrating sustained user engagement. Strong cash flow and a significant liquidity position further underscore the company’s financial health. However, the company’s fourth-quarter revenue forecast of $1.51 billion to $1.56 billion slightly trails analyst estimates, indicating a potential slowdown in growth. Despite this, Snap’s board approved a $500 million share buyback program, signaling confidence in the company’s future prospects. The stock price, however, showed a slight dip in premarket trading following the news of the ongoing legal challenge.
