Protecting children online is unquestionably an important task. But the UK’s Online Safety Act, a controversial and powerful new law, has drawn widespread concern from foreign governments, Trump administration officials, members of Congress, and free speech organizations because of its extensive criminal penalties, mandates on foreign companies, and potential for government abuse.

Policymakers must be aware of how this law regulates American companies, how those regulations transform the digital market across the world, and how these kinds of laws affect all internet users. The OSA is particularly important for any website that has user-generated content such as social media platforms, digital distributors, and even video games. Since users are global, regulations in one country can affect the entire market.

Websites are now mandated to employ content moderation, reporting tools, and risk assessments and then notify the British regulator about all such implemented changes, whether a parent company’s website is based in the UK or not.

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While the law has some laudable measures, such as its age verification requirement for online pornography websites, the OSA criminalizes “false” communications intended to cause “non-trivial psychological or physical harm” to a likely audience. The scope of the content moderation policies in the Online Safety Act would be unlikely to pass legal scrutiny in the U.S. with the First Amendment.

Importantly, the act has regulatory teeth, as companies can be fined up to £18m or 10 per cent of global revenue—whichever is greater.

Any company faced with the prospect of such a large fine will undoubtedly mitigate their risk, and American companies are no exception. Businesses are changing their standards to comply, and consequently users are likely to be changing their behavior.

User discussion and content-driven features appear to be being postponed or abandoned out of fear of litigation, partly because small businesses are treated similarly to digital giants such as Microsoft or Google. Under the act, both must complete a risk assessment. This regulatory hurdle can crush and demotivate small innovators as they may feel obliged to adopt the strictest set of rules.

Companies with anonymous userbases, meanwhile, risk being banned or face costly lawsuits. Wikimedia, the parent company of Wikipedia, has already lost a legal challenge to protect its contributors’ identities. The danger is that anyone—regardless of nationality—who contributed to a Wikipedia article could have their anonymity breached if the website is required to verify their identity. Users will respond to these laws globally because such regulations can affect them regardless of wherever they live.

Due to the Online Safety Act’s liability clauses, companies are avoiding risk by eliminating or outsourcing social features like chatrooms where “harmful” things might be said. In response, some of the bigger players—such as Discord—are creating services that could enable smaller developers to effectively offload the risk.

While this might sound like good business on the surface, history suggests this will prove a net negative. First, it could end up reducing smaller developers’ creativity and innovation. Second, such services could end up becoming entrenched in online ecosystems in an irrevocable way that generates negative externalities.

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Online services regularly close or go out of business. Imagine an alternative universe where Skype was the provider that handled everyone’s access to a social media platform. All that media and content could have become inaccessible when it shut down in May. Worryingly, Discord confirmed that at least 70,000 users’ IDs may have been exposed in a hack that compromised one of its third-party vendors, showing how even market solutions to a policy problem could actually lead to less security.

This example highlights why age verification requirements must include user data privacy and security standards and hold companies liable for violations. But even if the companies complied with such laws, British users are increasingly circumventing the rules in effort to protect their anonymity and access the content they want through Virtual Private Networks. A well-crafted law would not push ordinary people toward avoiding or circumventing it altogether.

Instead of simply reacting to the UK’s OSA, American policymakers should lead with a strong, balanced regulatory framework that protects children online, respects user data privacy, and upholds First Amendment rights.

In the same way that federal regulation can help stabilize a market over a patchwork quilt of state regulations, the online marketplace needs America to lead with innovative and workable online rules. Most important of all, Americans must become aware of how our digital economy is being changed without our consent through laws like the UK’s Online Safety Act.