Social media network Twitter (NYSE:TWTR) added fact-checking labels to two of Donald Trump's tweets this week, and that action didn't sit well with the President. On Thursday, he signed an executive order intended to stave off future fact-checking efforts across the social media sector, as a whole.

Section 230

The full text of Executive Order 13925 is not yet available in the Federal Register, but a draft of the document was said to limit the scope of Section 230 in the Communications Decency Act. This 1996 law states that, "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." This protects the service provider from legal action based on the content of messages that they send or publish.

Curtailing this important paragraph could make online media services like Twitter, Facebook (NASDAQ:FB), and Instagram legally liable for content created by users of each service. In reality, many of them would probably rather close down their public services rather than become easy targets for thousands of legal challenges.

Close-up photo of a gavel resting on a wooden stand in front of an out-of-focus American flag.

Image source: Getty Images.

Twitter executives have said that the company will continue to add fact-checking tags to tweets with questionable or misleading content. In the posts that started this week's uproar, Trump claimed that mail-in ballots will result in voter fraud. Twitter flagged these claims as "misleading." The company started using these tags in order to fight dangerous misinformation related to the COVID-19 pandemic and has continued to apply them to hundreds of messages this week alone.

What's next?

The Executive Order faces legal and constitutional reviews before passing into law. It's unclear whether the Order will be able to pass these tests, which could turn the online world upside down if allowed to take effect.

Investors don't seem terribly worried about the potential damage from a toothless version of Section 230. Shares of Twitter, Facebook, YouTube parent Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), and Snapchat operator Snap (NYSE:SNAP) barely moved on the news.