Ban Pay-to-Play National Security Approvals

Editor’s note: This article is cross-posted at Just Security. 

In late December, in what seemed like the end of a five-year saga, TikTok agreed to spin off its U.S. operations to a group of investors. Oracle, Silver Lake, and an investment firm from Abu Dhabi called MGX would control approximately 45 percent of the new entity, and the new U.S. company, TikTok USDS Joint Venture (with a mostly American board), would retrain the U.S. TikTok algorithm and establish content moderation rules.      

This complicated arrangement has its roots in the Protecting Americans From Foreign Adversary Controlled Applications Act (PAFACAA), which Congress passed in 2024 to force ByteDance (a Chinese company and TikTok’s owner) to divest from TikTok with the aim of reducing national security threats posed by the algorithm. The Committee on Foreign Investment in the United States (CFIUS) had spent years reviewing ByteDance’s acquisition of the company that became TikTok and contemplating requiring a divestment, but Congress forced the issue in PAFACAA. Pursuant to the statute, the President needed to certify a successful divestment in order for TikTok to avoid being shut down. 

But the Oracle-Silver Lake-MGX-TikTok deal that the President approved was immediately controversial. Some critiqued the deal for not fully complying with PAFACAA because ByteDance still controlled a part of the U.S. company. Others speculated that the friendly relationship between Trump and Oracle’s founder, Larry Ellison, drove the deal, while still others worried that the new company might censor speech critical of President Donald Trump. But neither the administration nor the companies released additional information about what the parties had agreed to. 

On March 13, a striking element of the deal emerged. The Wall Street Journal broke the story that the TikTok investors paid around $2.5 billion to the U.S. government when the deal closed and will pay billions more over time, for a total of $10 billion. Even now, we lack full information about the deal, as do senators such as Mark Warner (D-VA). (One official who spoke on background to Axios about the deal said, “‘You should FOIA the shit out of this.’”) 

When Trump originally announced the deal last fall, he alluded to a possible payment, saying that the government “is getting a tremendous fee-plus . . . just for making the deal.” But Congress did not create national security-related statutes to authorize the executive to trade transaction approvals for cash. It adopted those statutes to advance U.S. national security, while providing guardrails and procedures to give clarity to the regulated actors, guidance to the executive branch about how to balance different equities, and transparency to Congress. The Trump administration has turned the statutes on their heads. 

Congress must right the ship by banning the government from demanding and companies from providing payments to the government for national security-related approvals to conclude transactions, export products, or receive licenses. Allowing this unprecedented practice to continue risks making the United States both economically weaker and less safe.

The Risks of the “New Command Economy” 

The TikTok case exemplifies the most egregious of the problems with what we have called the “new command economy” (NCE). In a forthcoming article, we argue that the U.S. government’s turn to economic tools of national security has rendered companies increasingly central to national security in ways that go far beyond historical levels of entwinement between the government and companies. The government has made equity investments in critical minerals companies, leaned on companies as front-line enforcers and self-enforcers of export controls and other economic tools, and relied on corporate proxies to channel the government’s national security interests. We generally expect the U.S. government to adhere to public law values such as legality, rationality, accountability, transparency, and fairness, but the NCE produces a range of risks to those values, including decision-making distortions, incentives to act unlawfully, lack of transparency, and conflicts of interest. 

To be sure, the invocation of the mantra that “economic security is national security” and the accompanying reliance on companies for national security activities span the last few administrations. The NCE is not wholly new to the second Trump administration. 

But the current administration’s move to demand payments for national security-related approvals is unique to it. These payment demands are among the most pernicious and most dangerous features of the NCE. Although we think that trying to foster national security by relying on corporate actors raises certain risks to public law values generally, the payment demands do something different. They turn national security into what Senator Warner called a “tradable item.”

The Problems with Payment Demands 

The TikTok payment is the latest – but far from the only – instance where the Trump     administration has demanded payment from regulated parties in exchange for a national security-related approval. In August, after the government withheld previously awarded grants, Intel agreed to allow the U.S. government to purchase a 10 percent equity stake “funded by . . . $5.7 billion in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program.” 

The administration has also demanded that, in exchange for export licenses, Nvidia and Advanced Micro Devices (AMD) give the government a cut of their profits from sales of advanced semiconductors to China. The issue first arose in July when the administration reversed prior export controls and made clear that it would allow companies to export certain advanced chips to China. But the Department of Commerce did not issue export licenses until Nvidia and AMD agreed to “pay the United States 15 percent of the money they take in from selling artificial intelligence chips to China.” After China discouraged purchase of the chips, the Trump administration upped the ante in December, allowing Nvidia to sell the H200, its “second-most-powerful chip,” to China. But the export permission came with a payment demand: “25 percent of all the revenues from the sales would go to the United States.” 

These payment demands in exchange for national security-related approvals raise several significant risks. 

The first is that they distort the decision-making of both the government and the companies. For the government, what should surely be security-driven decisions are tainted by the possibility that the government is granting the approval (or granting more approvals than it otherwise would) in order to obtain a monetary payout. If the government stands to benefit monetarily from granting approvals, it stands to reason that it will grant more of them—even when the approvals may not be warranted from a national security perspective. Moreover, even if granting a certain approval is the right call on purely national security grounds, the obvious incentive for the government to grant the approval to make money creates the appearance that security decisions aren’t really motivated by security and that the government may not be operating rationally or fairly. As former Commerce Department officials Don Graves, Jr. and Aroop Mukharji recently warned: “[A] democratic government does not exist to enrich itself. National security policy, therefore, should not seek profits or involve opportunistic bonus payments. The U.S. government’s national security responsibility is to ensure national security. That is it.” 

The government demands also risk distorting companies’ decision-making. Companies may agree to make proposed payments to stay on the government’s good side, even if the deal itself is not in the best interest of the company or its shareholders. Consider, for example, Intel’s August 2025 filing with the Securities & Exchange Commission notifying the Commission and investors that its agreement with the U.S. government is 

subject to a number of risks and uncertainties and the US Government’s ownership of significant equity interests in the Company may subject the Company and it [sic] stockholders to a number of additional risks and uncertainties, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations or adversely impact the interests of our other stockholders. 

Or companies that wish to curry favor with the government, perhaps in anticipation of future dealings with it, may choose to buy supplies from the companies in which the government has taken shares. If one of the biggest strengths of the United States is the health of U.S. companies, we should worry about these distortions affecting the health of particular companies and the market more generally. 

The second risk is that the payment demands are flat out unlawful, or that they at least provide incentives for both sides of the transactions to act unlawfully and avoid being transparent about the arrangements. In the TikTok case, the government has not put forward publicly any legal theory to support its authority to demand the payments. That’s a transparency problem, even if such authority exists. But the failure to make the deal’s terms public may well be because there is no such authority. In a system of limited government like in the United States, the government needs authority to act. It does not have residual authority to do whatever it wants unless specifically prohibited from doing so. An additional problem flows from the lack of information about where the $10 billion is going and what it will be used for. Congress should care a lot about this problem, given that the power of the purse appears to be one of its few remaining powers today. 

The third related problem is that these pay-to-play arrangements create – and build on existing – conflicts of interest. Government officials, their family members, and Trump administration cronies have interests in the deals and stand to benefit from their conclusion. These conflicts of interest strengthen the incentives to get the deals done, even if they may ultimately harm U.S. national security. 

Usually, when the government acts unlawfully, people sue. However, in many questionable transactions in the NCE, parties are not suing because those who have the clearest basis for litigating—those being extorted—have no incentive to do so. The Trump administration has made it very costly to get on the wrong side of the government, and companies such as Nvidia seem to have calculated that they would rather pay a large fee to the government and be able to sell their products to China than sue the government and be unable to sell its chips there. The same appears to be true for the TikTok investors who chose to pay the fee to get the deal done.

The Solution: Ban the Payments 

In light of the risks of decision-making distortions, illegal acts, lack of transparency, and conflicts of interest, what should be done? 

Although our article focuses on a wider range of problematic transactions and a broader range of proposals than we can address here, we think there is one simple, tangible step that Congress should take to address pay-to-play national security deals such as TikTok’s: ban the payments. 

Congress should ban the government from demanding payments from regulated parties to obtain national security approvals and prohibit companies making such payments to the government. Congress should explicitly ban the government from imposing charges (except perhaps statutorily authorized filing fees) for any national security licenses or approvals from the government, including licenses to transact with actors facing sanctions or CFIUS approvals of certain foreign investments in U.S. companies. With respect to export controls, the Constitution and federal statutes already ban taxing exports. But as the Nvidia and AMD deals show, Congress must do more to prevent the Trump administration from working around these prohibitions. In particular, Congress should also ban the workaround the administration is using for Nvidia and AMD of requiring a company to import an item for inspection and charging a tariff at the time of import before allowing the item to be exported. In enacting these prohibitions, Congress should establish robust criminal and civil penalties for violations and make clear that government officials – not just private actors – will bear liability for those violations. The statute of limitations for criminal offenses should be set long enough to outlast any one administration.

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According to the WSJ report on the TikTok payment, “Administration officials have said the fee is justified given Trump’s role in saving TikTok in the U.S. and navigating negotiations with China to get the deal done while addressing the security concerns of lawmakers.” But that’s not something a president or the executive branch should collect billions of dollars for doing: that’s just their job.