The social-media giant agreed to pay up to $16.68 billion as part of the settlement

A lawsuit accused Meta of designing Facebook and Instagram in ways that would "entice" younger users.

Shares of Meta Platforms surrendered their initial gains as Wall Street assessed the implications of the company's $16.68 billion settlement in a closely watched legal battle over child safety.

The settlement came during the second week of a California federal trial over claims brought by a coalition of 29 states that accused Meta (META) of designing Facebook and Instagram to "entice, engage and ultimately ensnare" children. Meta was also accused of misleading the public over the safety of its platforms and improperly collecting the personal data of children who used its services.

The trial has been seen as a cloud over Meta's stock.

Meta's stock was up 4% shortly after the settlement was made public, but it promptly reversed lower. The agreement came just a few months after Meta was ordered to pay nearly $1 billion in a New Mexico state court ruling that required the company to put limits on how young people use its platforms.

"Today, we have secured a settlement with Meta that will make social media less dangerous for our kids and make a world of a difference for children and their families," California Attorney General Rob Bonta said in a statement.

Bonta said that Meta "has agreed to make massive transformations that will reduce the risk of harm from its platforms - and will do it within months."

He added: "We are talking about time limits, stopping notifications during school, a block on the app during critical overnight hours, bans on plastic surgery filters and so much more."

Meta didn't immediately respond to MarketWatch's request for comment.

This is a developing story. Check back for updates.

-William Gavin