Congress Introduces SCAM Act to Hold Platforms Liable for Fraudulent Ads

Small businesses that advertise on social media would face new identity verification requirements before placing paid ads, including submitting government-issued IDs and proving their business legally exists. While legitimate businesses may experience some added friction and delays in getting ads approved, the law also protects them from being impersonated by scammers who steal their brand images or names to run fraudulent ads.

The bill requires advertisers to provide government-issued identification and verified physical locations before placing ads on online platforms. People without valid government-issued IDs would be effectively locked out of paid digital advertising, potentially impacting those who run informal businesses and rely on social media ads to reach customers.

Gig workers who use social media advertising to promote their freelance services would need to go through identity verification, adding a step to their marketing process. On the positive side, gig workers are frequent targets of job scams and fake opportunity ads on social media, so stronger fraud detection could reduce their exposure to these schemes.

Crypto investors are among the most heavily targeted groups for fraudulent ads on social media, including fake giveaways, phishing schemes, and impersonation scams using AI-cloned voices of well-known figures. The bill's requirements for advertiser identity verification and active fraud detection systems could significantly reduce the volume of crypto scam ads that lure people into sending money or sharing wallet credentials.

LGBTQ+ individuals are disproportionately targeted by romance scams and fraudulent dating-related ads on social media. The bill's fraud detection and advertiser verification requirements could help reduce these predatory ads, though the impact is indirect and depends on strong enforcement.

Social Security recipients, particularly older adults, are prime targets for government impersonation scams run through paid social media ads. The bill specifically cites $81.5 billion in estimated fraud losses by older adults and requires platforms to run impersonation detection programs. This could meaningfully reduce the scam ads that trick seniors into sharing personal information or sending money to fake government agencies.