Pa. Attorney General Dave Sunday joins lawsuit to block 23andMe's sale of data

Pennsylvania Attorney General Dave Sunday has joined a multi-state lawsuit to block 23andMe's sale of consumer data following the company's bankruptcy filing, arguing that the sale of sensitive personal and genetic information without consent violates consumer rights. The lawsuit, joined by over 25 other states, seeks to prevent the transfer of biological samples, DNA data, health information, and medical records. Despite 23andMe's instructions for users to delete their data, some consumers have reported difficulties accessing their accounts and completing the deletion process.

Analysis

23andMe, a genetic-testing company, faces a significant legal challenge, now joined by Pennsylvania and over 25 other states, seeking to block the sale of sensitive consumer data following its bankruptcy filing earlier this year. The multi-state lawsuit argues that the company's attempt to sell personal genetic information, biological samples, and health-related records as part of its bankruptcy proceedings, potentially labeling it a 'change of ownership,' violates consumer rights and legal obligations, as users, including many Pennsylvanians, did not consent to their data being sold to the highest bidder. This development, reflected by a "strongly negative" sentiment and "pessimistic" tone from associated data signals, intensifies the scrutiny on 23andMe's practices and its ability to realize value from its data assets. While the company provides instructions for data deletion, reports of consumer difficulties in accessing accounts and completing this process, despite 23andMe's assurances of resolution, further compound its operational and reputational challenges. The case, with a bankruptcy hearing set for next month, underscores heightened regulatory concerns within "Cybersecurity & Data Privacy" and "Healthcare & Biotech," potentially setting a precedent for how consumer data is treated in corporate insolvencies.

Key Decisions for Investors

• Given the substantial multi-state legal opposition to 23andMe's proposed sale of consumer data, the company's ability to monetize this key asset during bankruptcy is severely threatened, significantly clouding recovery prospects for any stakeholders.
• Investors should critically assess other companies, particularly in the genetic testing, healthcare, and data-intensive sectors, for similar risks related to data privacy policies and consumer consent, as this lawsuit highlights increasing regulatory and legal hurdles to selling sensitive data, especially under duress.
• The outcome of 23andMe's bankruptcy proceedings and this associated lawsuit should be closely monitored, as it is likely to establish important legal precedents regarding data ownership, consumer rights in bankruptcies, and the valuation of data assets, potentially altering risk assessments for investments in data-centric businesses.