SACRAMENTO, California — California has agreed to drop portions of a law that requires large social media companies to disclose their policies for handling hate speech, disinformation, harassment and extremism following a legal challenge from Elon Musk’s X.

Elon Musk warns California risks bankruptcy without reforms. Despite Newsom’s balanced $322B budget, experts predict $20–$30B deficits due to volatile tax revenue and federal aid reliance. A $40B wildfire aid request may add further strain.

Elon Musk has raised concerns about California's financial stability, suggesting the state may face bankruptcy. Governor Gavin Newsom grapples with a significant budget deficit, while Musk points to high public spending and restrictive business regulations as key issues contributing to the state's economic downturn.

California will no longer enforce key provisions of a law requiring social media companies to disclose details about their content

California’s justice department agreed to drop parts of a controversial social media law that drew the ire of Elon Musk’s X. California’s AB 587 required social media companies to inform state officials of their policies regarding handling hate speech,