Rhode Island is first state to sue Meta over alleged profits from scam ads

A fake investment opportunity, a phony Social Security benefit or a dubious health product might seem like just another random ad on Meta’s platforms. 

But Rhode Island Attorney General Peter Neronha claims the tech giant allows the same advertising machinery that helps legitimate businesses find customers to be used by scammers to target victims, allowing Meta to reap in billions of dollars of revenue.

That’s the central allegation in a lawsuit Neronha’s office filed Oct. 22 in Providence County Superior Court, making Rhode Island the first state in the nation to sue Meta over its alleged role in profiting from scam ads. The 85-page complaint accuses the California-based Meta, which owns Facebook, Instagram and WhatsApp, of violating Rhode Island’s consumer protection laws.

“For a company that engages so many Rhode Islanders and Americans, maintaining high standards for consumer safety should be of the utmost importance,” Neronha said in a statement.

A Meta spokesperson called the state’s claims “unfounded,” noting that the company ​regularly partners with law enforcement to disrupt scam networks.

“The Attorney General refused to engage with us on ways we protect Rhode Islanders from scams, and has instead hired an out-of-state private law firm to concoct a lawsuit that ignores the full range of actions we take to combat scams every day,” the spokesperson said in a statement to Rhode Island Current. “We fight scams because they’re not good for us or the people and businesses that rely on our services.”

Rhode Island is the first state to sue Meta over its alleged role in profiting from scam ads, but not the first government to do so. Santa Clara County in California filed a similar lawsuit in May, accusing the company of violating state laws against false advertising and unfair business practices.

The state’s case adds to a wave of legal challenges Meta has faced over the harms its platforms allegedly cause, from child safety to consumer privacy.

In August, Meta agreed to pay 47 states, including Rhode Island, along with the District of Columbia and several U.S. territories, up to $17.1 billion to settle claims that its social media platforms are addictive and endanger children.

Just a day before Rhode Island filed suit, a New Mexico judge ordered Meta to pay the state $25 billion after finding the company liable for violating consumer protection laws in a case involving its handling of users’ data.

Can Rhode Island hold Meta liable?

Neronha’s office filed the case under the state’s Deceptive Trade Practices Act, which prohibits unfair or deceptive business practices. The law allows the attorney general to sue companies in Rhode Island Superior Court and ask a judge to order them to stop, restore money or property obtained through unlawful conduct, or face other penalties.

Michael Yelnosky, a professor at Roger Williams University School of Law, said Meta may consider moving the case to Providence’s federal court, where defendants in complex litigation often prefer the closer pretrial oversight. But the optics wouldn’t look good for the tech giant, he warned.

“I would also imagine Meta would prefer not to be the big bad out-of-state defendant litigating against the AG on his home turf,” Yelnosky wrote in an email Monday to Rhode Island Current.

A more consequential legal question posed by Yelnosky is whether Section 230 of the federal Communications Decency Act shields the company from liability for scam ads posted by third parties.

“The complaint alleges conduct by Meta that takes it out of the role of passive poster, but a court will need to make that call and the AG will need to factually support those allegations,” he wrote.

Rhode Island’s lawsuit cites reporting by Reuters from 2025 on internal Meta documents detailing the scale of fraudulent advertising on the company’s platforms — and its estimates that revenue from scam ads and other prohibited advertising far exceeded the fines it expected to pay for failing to stop them.

The state alleges the company’s advertising tools help scammers create and refine ads, identify audiences likely to respond and use automated systems to reach potential victims.

“Meta knew that fraud was rampant on its platforms but not only developed and applied policies that protected fraudulent actors and reined in its own enforcement efforts, but misled consumers about the prevalence of such fraud and its efforts to address it,” the lawsuit states.

The complaint points to ads promoting supposed miracle cures, including one that promised to reverse Alzheimer’s disease in 45 days. More than 2,000 versions of the ad were active in Meta’s public advertising library, according to the lawsuit.

“Meta left Rhode Island consumers without the ability to protect themselves from bad actors on its platforms,” the lawsuit states.

The complaint also cites ads for AI tools that generate sexually explicit images. One example shows a fully clothed woman in a coffee shop before depicting her in a sexual act in the next frame, which is blacked out in the lawsuit.

Much of the 85-page complaint is redacted, including Meta’s internal communications surrounding its ads.

In a motion filed Monday, Neronha’s office asked the court to allow it to file a complete, unredacted version of the complaint under seal while the parties work to determine which information should remain confidential. The motion proposes resolving those disputes by Nov. 19.