This Act prohibits online platforms from displaying fraudulent paid advertisements unless they implement strict identity verification and scam detection procedures, while also allowing for FTC enforcement and private lawsuits.
Ruben Gallego
Senator
AZ
The Safeguarding Consumers from Advertising Misconduct Act (SCAM Act) holds online platforms accountable for displaying fraudulent or deceptive paid advertisements. It mandates that platforms implement strict advertiser verification and robust detection systems to prevent scams. The bill empowers the FTC, state attorneys general, and private citizens to enforce these new standards against platforms that fail to take reasonable steps to stop advertising misconduct.
The SCAM Act: New Rules Force Tech Platforms to Verify Advertisers and Purge Fraudulent Ads Within 72 Hours
The Safeguarding Consumers from Advertising Misconduct (SCAM) Act sets a hard line for social media networks and apps: if you take money to run an ad, you're now responsible for making sure that advertiser is actually who they say they are. The bill targets the digital 'Wild West' where fake giveaways, AI-cloned celebrity endorsements, and nonexistent products flood our feeds. By requiring platforms to collect government-issued IDs and business documentation before an ad goes live, the law aims to stop scammers from hiding behind synthetic identities. It also strips away the 'Section 230' legal shield that tech companies have long used to avoid being sued for the shady ads they host on their sites.
Cleaning Up the Feed
Under the new rules, platforms must launch an active impersonation detection program to catch those 'too good to be true' health cures or romance scams before they reach your screen. For the average user—like a 20-something scrolling through Instagram or a retiree on Facebook—this means the reporting tool you use for suspicious ads actually has teeth. If you report an ad or the platform’s own AI flags one, the company has exactly 72 hours to investigate. If they find it’s a fraud, they have to yank it down within 24 hours of that decision. This isn't just a suggestion; if a platform fails to act, you or your state’s Attorney General can take them to federal court to recover damages.
The Cost of Compliance
While this is a win for anyone who’s ever lost $500 to a fake retail site, it creates a massive new workload for tech companies. They’ll need to build automated and manual systems to vet every single person who wants to buy an ad. There’s a 'presumed compliance' loophole where platforms can get their security programs pre-approved by the FTC to avoid some liability, but that won't protect them if they stop paying attention to their own rules. For small businesses trying to advertise legitimately, this might mean a few more hoops to jump through during the sign-up process, but the trade-off is a digital marketplace where they aren't competing with bots and bad actors.
Closing the Accountability Gap
The bill doesn't just stop at ads; it asks the FTC to look at the bigger picture of how money moves in these scams. Within nine months, the FTC must report back on whether we need even more laws to stop digital payment fraud. This is a direct response to the nearly $200 billion lost to fraud in 2024 alone. By making it easier to sue for 'willful' violations—where a court can award triple damages—the law puts a high price tag on negligence. Whether you're a coder building these apps or a contractor just trying to buy tools without getting ripped off, the goal is to make the person taking the ad money just as accountable as the person placing the ad.