Senate Bill Aims to Curb Fraud Ads on Social Media Platforms

The bill, formally titled the Safeguarding Consumers from Advertising Misconduct Act, or SCAM Act, was introduced by Senator Ruben Gallego, a Democrat from Arizona, and Senator Bernie Moreno, a Republican from Ohio. It would require large social media companies to take “reasonable steps” to prevent fraudulent advertising and would expose them to enforcement actions by the Federal Trade Commission and state attorneys general if they fail to do so.

At its core, the legislation seeks to impose basic verification and accountability obligations on platforms that profit from digital advertising. Under the bill, social media companies would be required to verify advertisers using government-issued identification or confirm the legal existence of businesses before allowing them to run ads. Platforms would also be expected to promptly investigate and respond to reports of scams submitted by users or government agencies.

Failure to comply would be treated as a violation of federal consumer protection law, giving the FTC authority to pursue civil penalties and allowing state attorneys general to bring their own enforcement actions. Per Reuters, the bill has won early backing from groups including the American Bankers Association and AARP, which have long warned that online scams are draining billions of dollars from consumers, particularly older Americans.

The lawmakers have framed the legislation as a response to what they see as a business model problem rather than a technical one. “If a company is making money from running ads on their site, it has a responsibility to make sure those ads aren’t fraudulent,” Gallego said in a statement announcing the bill.

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The timing of the legislation is closely tied to a Reuters investigation published late last year that examined Meta’s internal assessments of fraud advertising across Facebook, Instagram, and WhatsApp. According to internal company documents reviewed by Reuters, Meta projected that roughly 10 percent of its overall revenue, or about $16 billion, could be tied to ads for scams and other prohibited products.

Those documents suggested that Meta was aware for years of the scale of scam advertising on its platforms but often hesitated to impose tougher controls that could reduce advertising revenue. In some cases, advertisers flagged as likely scammers were allowed to continue running ads, sometimes at higher prices, rather than being removed outright.

While the SCAM Act does not single out Meta or any other company by name, its supporters have made clear that the Reuters reporting helped crystallize concerns that voluntary platform policies are not sufficient. A press release accompanying the bill explicitly cited the investigation, arguing that it showed how financial incentives can undermine self-policing by large platforms.

Meta has disputed key elements of the Reuters findings, saying its internal revenue estimates were overly broad and overstated the role of scams. The company has also said it has increased investments in fraud detection and reduced reported scam ads in recent years.

Even so, the legislation reflects a broader shift in Washington toward treating online fraud as a systemic consumer protection issue rather than a byproduct of bad actors. By tying liability directly to advertising practices, the SCAM Act would move social media companies closer to the compliance expectations long applied to financial institutions and other regulated industries.

Whether the bill advances remains uncertain, but its introduction signals that Congress is increasingly willing to translate investigative findings and public pressure into enforceable rules. For platforms whose advertising revenues remain the backbone of their business models, the proposal represents a clear warning that the era of largely voluntary anti-scam measures may be coming to an end.

Source: Reuters