Why Meta Platforms Stock Crashed Today

META shares dropped 3.3% to 4.1% Tuesday as a multi-state child safety lawsuit entered trial in California federal court. Attorneys general from 29 states allege the company knowingly designed addictive features that fueled a youth mental health crisis and collected data from users under 13 without parental consent, violating federal law.

The states are seeking damages exceeding $200 billion. Legal observers are drawing parallels to the Big Tobacco litigation of the 1990s, which resulted in a $246 billion settlement and forced operational changes across the tobacco industry. The trial marks the first courtroom test of allegations that have circulated since internal documents leaked in 2021, and a loss could force META to redesign core engagement features across Facebook and Instagram.

The case consolidates claims that have been building since former employee Frances Haugen testified before Congress in 2021. META has previously argued its platforms include parental controls and safety features, but prosecutors contend internal research showed the company prioritized engagement metrics over user well-being.