Newly Signed Deal Offers Pathway for Chinese Company ByteDance Into TikTok’s New U.S. Operation

After several years of courtroom wrangling, the social media app TikTok will remain active in the United States despite its continued ties to China.

On January 22, ByteDance, TikTok’s Chinese parent company, announced an agreement with a consortium of non-Chinese investors to create a separate U.S.-only TikTok entity. The deal follows months of negotiation between Chinese and American officials to finalize the app’s sale after the passage of a 2024 law requiring ByteDance to divest from TikTok. The law was passed due to concerns over China’s ability to manipulate TikTok’s algorithms to show pro-Beijing content and access Americans’ data.

Despite its reported independence from China, the new entity in the United States continues to present a range of national security challenges, including Beijing’s continued capacity to influence the app’s content, along with lingering security concerns over the app’s data storage practices.

Deal Will Allow New U.S. Consortium To License ByteDance’s Algorithm

According to TikTok, U.S. firms Oracle and Silver Lake will each own 15 percent of the new venture, with ByteDance retaining a 19.9 percent share. The new venture will have a majority American board, though both current TikTok CEO Shou Zi Chew and ByteDance representatives will have seats on the U.S.-based offshoot’s leadership structure.

The new venture will reportedly manage content moderation for TikTok’s American operations while retaining ByteDance’s proprietary algorithm. In an arrangement intended to partially sever TikTok’s operational ties with ByteDance, the investors claimed the new entity would retrain the app’s recommendation software using American data — a practice that the firm had instituted previously. The agreement will require TikTok to store American users’ data in Oracle’s U.S.-based cloud infrastructure and be audited by third-party cybersecurity firms.

Proposed Arrangement Likely Violates U.S. Law

Even following the deal’s signing, it remains unclear whether the arrangement is legally sound. Despite the new venture’s promise of retraining the algorithm, ByteDance will keep control of the app’s source code, an arrangement that may allow the firm to manipulate the app’s content. The arrangement likely raises significant legal liabilities for the new venture, with Supreme Court Justice Neil Gorsuch affirming in the court’s 2025 unanimous decision that the law governing divestment prevents any U.S. entity from cooperating with ByteDance “with respect to the operation of a content recommendation algorithm.”

The arrangement also does not resolve concerns over potential backdoors into TikTok’s data infrastructure. While the deal will allow Oracle to store American users’ data and establishes an internal security council, previous efforts to audit the app for security vulnerabilities stalled due to the magnitude of TikTok’s existing code base. Other measures to install a firewall between ByteDance and TikTok’s American user base, most notably Oracle’s 2022 “Project Texas,” allegedly permitted ByteDance employees to access American data and give direction to American-based TikTok employees. ByteDance’s continued relationship with the new entity magnifies these concerns, as the firm remains subject to Chinese national security law mandating compliance with Beijing’s intelligence-gathering activities.

Congress Should Exercise Oversight Over New Entity

While the Trump administration appears committed to certifying the deal, Congress should demand greater transparency into the U.S. operation’s reported connections to ByteDance, including the nature of the algorithm licensing agreement. These investigations could serve as the basis for future regulatory action and raise investor awareness of possible legal liabilities involved in the sale.

Jack Burnham is a senior research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow Jack on X @JackBurnham802. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.