It’s been a busy few weeks of news cycle for X-née-Twitter owner Elon Musk, who, among a million other Muskian things, is suing advertisers. But one story that’s liable to get lost in the hubbub: Nine privacy complaints have been filed against the company in the European Union, alleging that Grok — X’s AI chatbot and answer to ChatGPT — illegally hoovers up citizens’ user data. 

Big Tech’s Bugbear

The privacy lawsuits filed against X are being led by an organization called noyb, a longtime thorn in Big Tech’s side. Noyb’s boss is privacy activist Max Schrems, who successfully filed a case against Meta arguing its method for transferring EU data to the US breached the bloc’s stringent GDPR privacy laws. That case ended in a €1.2 billion fine for Meta as well as a logistical headache, and in June, complaints from noyb prompted Meta to hit pause on using EU users’ data to train its AI systems.

Now noyb has turned its attention to X, arguing that it did not ask for EU users’ consent before using their data to help train Grok. A spokesperson for noyb told The Daily Upside that the complaints could result in a fine of up to 4% of the company’s annual turnover. The punitive measures would hurt, too, because X has a lot less cash to play with than Meta: 

• X is no longer a public company, so we can’t see exactly how its cash reserves are doing, but we do know it took on roughly $25 billion in debt with a very high leverage ratio when Musk bought it in 2022. 
• Since then, the banks that helped fund the deal have struggled to unload their share of the debt, and Fidelity has given us clues to the firm’s valuation by announcing cuts to the value of its stake. At last count in March, Fidelity’s stake was 73% less valuable since the acquisition.

But even before Musk bought the company, Twitter was a small fish in the Big Tech pond that had struggled to stay consistently profitable.

Keir We Go Again: X is also losing political capital overseas. The EU opened an investigation into X over its content moderation policies late last year, specifically citing the spread of misinformation. Last week, misinformation on X became a huge part of the political discussion around far-right riots in the UK, and Musk himself waded into a war of words with UK Prime Minister Keir Starmer. The UK’s new Online Safety Act is not yet enforceable, so X doesn’t have much to fear in the way of big fines coming from Blighty, but the riots led some politicians to argue the act should be given more teeth. A spokesperson for Starmer said on Monday that the government will “look more broadly at social media” regulation in the wake of the riots.

The formerly British are coming!

Canada’s Scotiabank, one of the country’s big six lenders, announced Monday that it bought a 14.9% stake in US regional lender KeyCorp. After years of misadventures in Latin America, big Canadian banks like Scotiabank are pivoting to their neighbor, where they’re beginning to enjoy some success.

Moving North

The fourth-largest Canadian bank by market cap, Scotiabank bet big on Latin America, but with political upheaval and economic volatility in the region, things have not gone so well. Adjusted earnings growth from international banking fell to 3% in fiscal 2023, down from 32% in 2022. CEO Scott Thomson said in December that Scotiabank’s personal and commercial banking operations in Chile and Peru would be more cautiously funded, and that it could exit Colombia and Central America if business doesn’t turn around.

Meanwhile, unlike other foreign adventurers that flamed out in the US retail banking market — ahem HSBC, NatWest BBVA, and BNP Paribas — Canada’s major banks have proven resilient. Most notably, Toronto-Dominion (TD) and Bank of Montreal (BMO) have built out strong stateside retail units through expansion and acquisition. In the US, Scotiabank currently offers wealth management and global banking services to the financial services sector, but the stake in KeyCorp opens up possibilities: 

• Cleveland-based KeyCorp has about 1,000 branches in 15 states as well as $187 billion in assets, and offers retail and commercial banking. Scotiabank priced its offer for a 14.9% stake at $17.17 per share, a roughly 17% premium over KeyCorp’s last closing price.
• KeyCorp CEO Chris Gorman said it plans to explore investment banking, wealth, and payments opportunities through Scotiabank’s presence in Canada, Mexico, and Central America, as well as in the US. Like many US regional lenders, KeyCorp is coping with high interest rates that deter borrowing — the bank said in the second quarter that it predicts a 7% to 8% drop in loans this year — and higher deposit costs, with client deposits up 5% in Q2.

Hometown Advantage: One reason Canada’s big banks have been so aggressive abroad is there’s nowhere to grow at home: Royal Bank of Canada, TD, BMO, Scotiabank, and CIBC together dominate 90% of the domestic financial services market.

It’s maybe the one thing they can agree on, but economists hate it anyway. 

Vice President Kamala Harris announced Monday that she supports eliminating federal taxes on tips for service and hospitality workers, something former President Donald Trump also supports — he’s now accused her of idea-stealing. But most economists think the idea could short-change Americans and their government.

Change You Can Believe In

Trump has been campaigning on the idea of “no tax on tips” since June, and last month Texas GOP Sen. Ted Cruz introduced a bill to implement the idea with the support of Nevada Democratic Sens. Catherine Cortez Masto and Jacky Rosen. The appeal of such a populist policy for politicians makes perfect sense: The US had over 24 million people in service occupations as of 2022, according to US Census data.

Politicians, including Harris, have stressed that any new rules would come with income limits and prevent the likes of lawyers and hedge fund managers from structuring their pay to benefit, but this hasn’t satisfied economists. “How will we prevent investment bankers, say, from getting tips?” asked tax law expert Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center, in an interview with NPR. “And if we impose income limits, well, wouldn’t we expect low-paid workers just to demand a tip rather than compensation?” There’s a litany of other concerns:

• The federal government will lose income. Some 6 million hospitality workers reported $38.3 billion in tipped income in 2018, according to the most recent available IRS data.
• A uniform national ban would disproportionately benefit service workers in states where they are allowed to work for a reduced minimum wage, such as Tennessee or South Carolina. Workers in states with a higher minimum wage, like California and New York, where tips make up a smaller percentage of their income, would benefit less.

What Happens in Vegas: Trump and Harris both announced their no-taxes-on-tips pledge in Nevada, the state with the largest share of service workers in America — 22.9% of the state workforce was in leisure and hospitality as of June, according to the Nevada Department of Employment. However, a June study by Yale University’s Budget Lab found that just 2.5% of workers nationally would benefit from the policy.