Attorney General Schwalb Sues TikTok for Preying on District Children, Operating an Illegal Virtual Economy

Lawsuit Alleges TikTok Operates Intentionally Addictive, Psychologically Damaging Platform, Deceives Parents About Safety & Profits from Exploitation of Young Users


Attorney General Brian L. Schwalb today announced a lawsuit against TikTok, Inc. (TikTok) for causing mental and physical harms to District children through its platform intentionally designed to be addictive to kids. The lawsuit also alleges that TikTok deceives its users and their parents about the safety of its platform, and illegally operates a money transmission business, all in violation of District consumer protection laws. The filing by the Office of the Attorney General (OAG) alleges that TikTok’s manipulative platform traps young users into cycles of excessive use that the company knows contribute to profound psychological and physiological harms, including body dysmorphia, sleep loss, depression, anxiety, and long-lasting neurological impacts. Despite this, TikTok misleads its users and their parents, falsely claiming that the app is safe for kids and that users have full control over their engagement, spending, and data.

Additionally, the lawsuit alleges that TikTok is operating an unlicensed virtual economy, in violation of District money transmission laws, which pairs live streaming (TikTok LIVE) with a virtual currency system (TikTok Coins). The complaint documents how users can purchase “Coins” to send “Gifts” to streamers that can be cashed out for real currency, after TikTok extracts up to a 50% commission—all without registering as a licensed money transmitter with the DC Department of Insurance, Securities, and Banking (DISB) or the US Treasury Department. TikTok is fully aware that these features combine to create an environment where children are often sexually exploited by users but has chosen to turn a blind eye in favor of increasing its profitability.

“TikTok’s platform, designed to be dangerously addictive, inflicts immense damage on an entire generation of young people,” said Attorney General Schwalb. “In addition to prioritizing its profits over the health of children, TikTok’s unregulated and illegal virtual economy allows the darkest, most depraved corners of society to prey upon vulnerable victims. The company knows what is happening and has chosen to ignore it. This lawsuit seeks to put an end to its illegal, deceptive, and predatory behavior.”

TikTok is Intentionally Addictive, Harmful, and Exploitative

Child and adolescent brains, which lack the impulse control of adults, are particularly susceptible to exploitation through the desire, reward, and reinforcement system that endless scrolling provides. To get users hooked on the app, TikTok uses a dopamine-inducing algorithm that spoon-feeds users highly tailored videos to keep them trapped on the platform for hours on end. TikTok capitalizes on young users’ heightened risk of online financial exploitation, deploying an illegal virtual currency layered with cartoon characters and appealing graphics that are intended to get them to spend money without adequate safeguards in place.

TikTok Falsely Claims the App is Safe for Children

TikTok falsely claims its platform is a safe place where users can control their engagement, their spending, and their data. In reality, young users are left powerless against the company’s sophisticated algorithms and design features meant to collect and exploit their personal data. Children easily bypass TikTok’s minimum age restrictions despite the company’s claims about the efficacy of its content moderation systems and parental controls.

TikTok Operates an Unlicensed Money Transmission System, Allowing Financial Exploitation of Children

TikTok’s harmful and unsafe environment stems in part from the company’s failure to properly register as a money transmitter with DISB and the US Treasury Department. Payment systems on digital platforms that facilitate the exchange of money between users (e.g., Venmo or Cash App) are subject to legal safeguards to prevent money laundering, fraud, and other illegal activity. TikTok blatantly skirts local and federal laws by avoiding these regulations, facilitating a significant number of sexually exploitative and other illegal transactions on TikTok LIVE as a result.

TikTok Profits from the Sexual Exploitation of Children on its Platform

TikTok not only enables sexual exploitation of children through its livestreaming and illegal virtual currency features, but profits from it, extracting up to a 50% commission from each financial transaction. Teens are frequently exploited for sexually explicit content through TikTok’s LIVE and Coins features, allowing the app to essentially operate like a virtual strip club with no age restrictions, all while the company deceives users and their parents, falsely claiming that it implements vigorous policies to protect teens.

The Office of the Attorney General’s (OAG) lawsuit, filed in the DC Superior Court, is part of a bipartisan coalition of 14 attorneys general across the country who filed lawsuits today making a range of claims against TikTok. With this lawsuit, OAG seeks to force TikTok to correct its harmful and deceptive consumer practices, and seeks to recover monetary restitution for impacted District residents, civil penalties, and attorneys’ fees.

The full complaint is available here.

This matter is being handled by Office of Consumer Protection Director Adam Teitelbaum, Deputy Director Kevin Vermillion, and Assistant Attorney General Jorge Bonilla Lopez.

 

Mental Health Trends Among District Youth

Per the Office of the State Superintendent of Education’s (OSSE) report on the District of Columbia’s 2021 Youth Risk Behavior Survey:

  • Almost half (47.7%) of the District’s high school girls self-reported episodes of psychological distress, including persistently feeling sad or hopeless.
     
  • Self-reports of suicidal thoughts, plans, or attempts have increased among young people in the District since 2007 and have remained consistently high.
     
  • Over a quarter (28%) of all middle school students and over a third (36.9%) of all middle school girls reported seriously considering attempting suicide.

Per OSSE’s report, in 2021:

  • Over 70% of all District high school students, including 74% of high school girls, reported spending more than three hours of their day on screen time. 
     
  • Over two thirds (67.5%) of District middle school students report spending three or more hours on screens per day.
     
  • Nearly three-quarters (73.6%) of District teens reported getting fewer than eight hours of sleep on an average school night.

 

How to Report Illegal or Unfair Business Practices

To report unfair business practices, scams, or fraud, you can contact OAG by: