New York (CNN) — Meta on Wednesday agreed to make sweeping changes to its platforms as part of an $18 billion settlement with dozens of states over claims its platforms contributed to a youth mental health crisis.
Regulators and online safety advocates called it a watershed moment, and both Meta and state attorneys general called on TikTok and YouTube to make similar changes.
But whether the settlement fundamentally alters the business of one of the world’s most powerful tech giants remains an open question.
The $18 billion agreement is a drop in the bucket for the nearly $1.5 trillion company (META) and a fraction of what states were seeking at trial, although Meta still faces hundreds of other similar cases. The litigation so far has revealed internal documents suggesting that Meta knew of the risks its platforms posed to young people, despite public statements about its commitments to safety.
Still, some online safety advocates say they wish the deal went further to upend Meta’s core, ad-based business model. And many are now calling on Congress to codify the changes in industry-wide federal legislation.
What is clear: Meta will no longer be able to grade its own homework on youth safety. An independent auditor will review its implementation of the required changes — a crucial step that parents and advocates have been demanding for years.
“It’s transformational,” California Attorney General Rob Bonta told CNN’s Richard Quest on Wednesday. “There’s a real, durable enforcement mechanism here and safeguard in place now.”
Meta did not admit wrongdoing as part of the settlement.
“The framework we’ve negotiated will empower parents to easily manage how their children access our platforms,” Meta Chief Legal Officer C.J. Mahoney said in a statement Wednesday, adding that the changes “set the right path forward for our whole industry.”
Changes to protect kids
Among the changes for users aged 13 to 17 are a two-hour daily time limit across Facebook and Instagram, a “night mode” making the apps unavailable from midnight to 6 am and a “school mode” limiting notifications during school hours. Only parents will be able to adjust those settings.
Meta will also turn off “like” counts by default on teens’ content and “extreme makeup” beauty filters.
Teens will have the option to turn off autoplay, so videos don’t start automatically when they open the apps, and select a feed not based on algorithmic recommendations.
Meta will have six months to implement the changes.
For Lori Schott, a founding member of the online safety parent advocacy group Parents RISE!, the changes are a “movement in the right direction.” But she said she wishes Meta had made them earlier, without litigation.
Schott says her daughter, Annalee, died by suicide at 18 in 2020 after Meta’s platforms repeatedly served her harmful content.
“For this, the mental health aspects are really important to me — the aspects of no beautification filters and the like buttons that are going to be removed — that impact so many little girls,” Schott, whose own individual lawsuit against Meta is pending, told CNN.
But while the settlement includes some “meaningful” changes, others don’t go far enough, said Sebastian Mahal, co-chair of the youth online safety organization Design It For Us. For example, while teens can opt-in to a non-algorithmic feed, the default remains a personalized version that’s better for Meta’s business, Mahal said.
“They’re really allowing users a semblance of a different experience,” Mahal said. “But we would rather see that these safest experiences be switched on automatically for users.”
The settlement also includes several carve-outs. “Night Mode,” for example, will still allow access to messaging on Instagram and Facebook when the apps are otherwise blocked for teens, according to court documents.
The effectiveness of many of the changes will largely depend on whether Meta can accurately detect teen users.
The settlement requires Meta to implement age verification software, either its own or from a third party. Meta said it is “investing in even stronger technology” to catch teens who misrepresent their age and keep users under 13 off the apps, but it also argues that app stores should bear some responsibility for verifying users’ ages.
Meta has previously backed legislative proposals to require app store age verification, something Google and Apple have pushed back on.
“Ideally, Meta will decide that the required design changes in this settlement would be beneficial to all users, not just children, but it is very possible that this will not be what happens given the profit Meta receives from locking in its adult users,” Syracuse University communications professor Alexis Shore Ingber said in emailed commentary.
Hitting Meta’s bottom line?
Wednesday’s settlement is a “home run for (Meta CEO) Mark Zuckerberg” financially, said Michael Coffey, a defense litigator and founding partner of Coffey Modica LLC, who was not involved in the Meta case.
It’s a small percentage of what Meta could have been forced to pay — up to more than $1 trillion, the company had estimated — if it lost in the trial with just four of the state attorneys general. And Meta will pay out the $18 billion settlement in annual tranches over ten years, which will go toward state youth mental health and online safety training programs.
Meta has also said it will pay out only 70% of the settlement unless TikTok and YouTube agree to pay around $6 billion each and make similar changes.
Bonta said the states are willing to take those companies to court if needed to get them on board with the deal. TikTok and YouTube did not respond to a request for comment.
The bigger question for Meta is what happens if it loses in the hundreds of cases from individuals, school districts and other states that remain. The company acknowledged in its most recent earnings report that the youth safety-related trials posed a risk of “material loss.”
Florida Attorney General James Uthmeier said Wednesday that his state didn’t join the settlement because the “payouts are peanuts compared to the profound harms Meta’s profit-driven addictive features inflicted on kids.” He added, “We’ll see them at trial.”
If teens spend less time on Meta apps because of the changes, that could dent the company’s bottom line. Forrester Principal Analyst Kate Winick said research indicates that the company earns around $11 billion annually from minors, although she added that “Meta is a very big business with lots of ways to make up that revenue.”
William Blair analyst Ralph Schackart said the deal largely removes uncertainty around what could have been an even higher penalty. Meta shares (META) ended Wednesday up just over 1%.
Especially as Meta pivots more to artificial intelligence, investors will likely now “place a greater focus on the company’s fundamentals … which remain strong,” Schackart wrote in a research note.
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