Bill
S 3774
The act bans fraudulent or deceptive paid ads on online platforms, and requires verification, detection, and rapid removal mechanisms to protect consumers.
Date introduced: February 4, 2026
Sponsor: Senator Ruben Gallego (with multiple cosponsors)
Purpose
- The SCAM Act seeks to prohibit online platforms from displaying fraudulent or deceptive commercial advertisements and to enhance oversight and accountability for online advertising practices that contribute to consumer harm.
Main aims
- Create a clear federal standard prohibiting the display of fraudulent or deceptive paid advertisements on online platforms.
- Require platforms that monetize ads to implement robust advertiser verification, detection, and user-reporting mechanisms.
- Improve transparency and speed in addressing fraudulent ads, with a structured enforcement framework and potential penalties administered by the Federal Trade Commission (FTC).
Key provisions and changes
1) Prohibition on digital advertising-related fraud (Section 3)
- It is unlawful for an online platform to display a fraudulent or deceptive paid advertisement if the platform:
- Accepted payment or compensation to display the ad, and
- Failed to take reasonable steps to prevent the ad from being shown.
- Defines “fraudulent or deceptive” advertising in alignment with FTC concepts and focuses on material misrepresentations or omissions likely to cause financial harm to consumers.
2) Additional requirements for online platforms (Section 3, subsection (b))
- Platforms that accept payment to display ads must implement:
- Identity verification procedures for advertisers before placement, including:
- Verification of legal name, physical location, and government-issued ID for individuals or documentation for entities.
- Collection of sufficient contact information for follow-up.
- Measures to prevent circumvention via false, stolen, or synthetic identities.
- An active impersonation detection and mitigation program.
- Automated and manual detection systems for fraudulent/deceptive ads.
- A clear, conspicuous reporting tool for users to flag suspected fraudulent ads.
- Investigation and removal timelines:
- If a report or detection identifies a fraudulent ad, platforms must investigate within 72 hours, and inform the reporter of findings within 24 hours after investigation.
- If the ad is found in violation, it must be removed within 24 hours after a determination, with possible removal during investigation as appropriate.
- Presumed compliance mechanism:
- Platforms can obtain a presumption of compliance by submitting an FTC-approved fraudulent/deceptive ad detection program and demonstrating ongoing enforcement and resource allocation. This presumption is not a blanket shield against individual enforcement actions.
3) Regulatory and enforcement framework (Section 3, Section 4)
- FTC enforcement:
- Violations are treated as unfair or deceptive practices under the FTC Act, subject to FTC enforcement powers.
- FTC policy mirrors existing FTC Act authorities in terms of investigative and enforcement tools.
- State involvement:
- States can bring action (parens patriae) on behalf of residents, with notice to the FTC and potential for Commission intervention.
- Preemption: Federal action does not preempt state or local laws; concurrent enforcement is preserved.
- Private right of action (Section 3, subsection (f)):
- Individuals harmed by violations can sue for injunctive relief, actual damages (with cap: up to 3 times for willful/knowing violations), and other applicable relief.
- Statute of limitations: up to 5 years from discovery of the violation.
4) Regulatory report on online scams (Section 4)
- A FTC-led report within 9 months of enactment assessing whether additional statutory authority is needed to curb online financial scams.
- Includes recommendations on information sharing among platforms, financial institutions, and regulators, and potential legislative or administrative actions.
5) Definitions (Section 5)
- Commission: Federal Trade Commission.
- Deceptive: Material misrepresentations or omissions likely to cause financial harm; aligned with FTC guidance.
- Online platform: Public-facing sites/apps that host user-generated content (e.g., social media, video platforms, VR/social networks).
Impact and scope
Timelines and regulatory process
Compiled from official sources — confirm details with the bill’s official record.
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