Meta sued by Santa Clara over scam ads, accused of profiting

Santa Clara County filed a civil lawsuit against Meta Platforms in May, alleging the company knowingly tolerated and profited from scam advertisements on Facebook and Instagram. The complaint, filed in Santa Clara County Superior Court on behalf of all California residents, seeks restitution, civil damages and an order to stop unfair business practices.

According to the filing, and citing internal documents first reported by Reuters, the county claims Meta earned as much as $7 billion annually from so-called “high-risk” scam ads and at times limited anti-scam measures when they threatened revenue. The complaint also alleges that Meta implemented “guardrails” that impeded broader crackdowns and that its generative AI tools sometimes aided unethical advertisers. Meta responded that it will defend itself and highlighted actions taken, including removing more than 159 million scam ads in 2025.

The lawsuit has drawn attention from investors and market watchers because advertising remains the core revenue source for Meta. Potential civil penalties and reputational damage could affect the company’s profitability outlook and introduce short-term stock volatility, particularly if the case uncovers additional internal practices or leads to substantial payouts. Local and international coverage has emphasized the financial as well as consumer-protection dimensions of the suit.

Santa Clara’s action comes amid a broader wave of legal challenges targeting major social platforms over consumer harm, algorithmic practices and safety failures. Separate cases — including state prosecutions and trials focused on youth safety and algorithmic harms — have already put Meta under sustained legal and regulatory pressure, amplifying the significance of any adverse rulings in California. Observers warn that multiple adverse outcomes could prompt policy and operational shifts across the industry.

Analysts expect the legal process to be protracted; critical milestones will include court rulings on standing, the scope of claimed damages, and discovery that may reveal internal policies. Market participants will closely monitor any interim findings, settlement negotiations, and how Meta adjusts its ad-moderation and revenue controls in response. The ultimate financial impact will depend on rulings, potential penalties and the degree to which advertisers and users change behavior.