This whole "sites with UGC will have to shut down entirely rather than face liability for their actions" nonsense is tiring. Facebook and Google are not going to decide to simply shutdown their eleventy billion dollar businesses because they will need to occasionally employ lawyers to defend themselves from lawsuits.
We need to actually and actively stop pretending this talking point is a thing. Sure, they can threaten to leave Australia for regulating them (as they have recently done), but unless you think some of the most valuable companies on the planet are going to literally pack up and leave the US because they'll be subject to the law (like every other non-tech-company already is!), I have ocean front property in Arizona to sell you.
Section 230 is a blanket immunity that allows Google, Facebook, and Twitter to avoid any sort of liability of any kinda for automated harms to society. That's it.
Sure, Section 230 technically applies to smaller websites, but it is effectively immaterial: Smaller websites and communities have reasonable, defensible human moderation activities. The United States court system is not some madhouse that you can exploit with bad code: It's built on firm pillars like intent and reasonableness. We have judges that rule on cases based on the facts of the specific issue in question, who are elected and accountable to the people.
Which is why, no, without 230, every website owner isn't suddenly going to jail because someone posted fraud. The intent isn't there. Intent is a crucial pillar of the law.
Meanwhile, Google and Facebook have harmful intent. Their intent is to raise engagement as much as possible, even if it radicalizes users, and causes actual harm to lives and liberty. Because at the end of the day, their moderation decisions are solely determined by profit. If it's not profitable to have adult content on the site because advertisers don't like it, adult content is banned. If it's very profitable to take political ads that claim falsehoods, you bet they're going to, because it makes them money. And if scammers and fraudsters pay top dollar for ad space, you know they'll be favored customers.
That is where Section 230 really applies: When bad people doing bad things can use it to hide behind any consideration of what they are doing. Section 230 doesn't defend tech companies, it dismisses all complaints against them, regardless of their merit.
Sure, it's going to cost Google and Facebook more to reckon with what they've done without immunity. So they really really want to keep that immunity. And they'll pay off every lobbyist, think tank, and so-called expert to tell you Section 230 is crucial to the Internet.
But when it's gone, they will suck it up and stay in business, because at the end of the day, they like money, and they'd still rather be in business even if it means they make a little less.