NEW YORK (Reuters) -White House-led talks on the future of TikTok are coalescing around a plan for the biggest non-Chinese investors in parent company ByteDance to up their stakes and acquire the short video app's U.S. operations, according to two sources familiar with the discussions.

The plan entails spinning off a U.S. entity for TikTok and diluting Chinese ownership in the new business to below the 20 percent threshold required by U.S. law, rescuing the app from a looming U.S. ban, said the sources, who asked to be kept anonymous because they were not authorized to speak on record.

Jeff Yass' Susquehanna International Group and Bill Ford's General Atlantic, both of which are represented on ByteDance's board, are leading discussions with the White House on the plan, the sources said.

Private equity firm KKR is also participating, one of the sources said.

The fate of the short video app used by nearly half of all Americans has been up in the air since a law took effect on Jan. 19 requiring ByteDance to either sell it or face a ban on national security grounds.

The law, passed last year with broad bipartisan support, reflects concern in Washington that TikTok's ownership makes it beholden to the Chinese government and that Beijing could use the app to conduct influence operations against the United States. Free speech advocates have argued that the ban unlawfully threatens to restrict Americans from accessing foreign media in violation of the First Amendment of the U.S. Constitution.

The company has said U.S. officials have misstated its ties to China, arguing its content recommendation engine and user data are stored in the United States on cloud servers operated by Oracle while content moderation decisions that affect American users are also made in the U.S.

Under the plan proposed by existing investors, software giant Oracle would continue to house U.S. user data and provide assurances that the data is not accessible from China, this source added.

Representatives for TikTok, ByteDance, Susquehanna, Oracle and the White House could not immediately be reached for comment.

General Atlantic and KKR declined to comment.

The Financial Times reported earlier on Friday that U.S. ByteDance investors were seeking to buy out Chinese investors in a proposed deal for a spun-off TikTok U.S. business, naming investment firm Coatue as another existing investor involved in the talks.

Coatue did not immediately respond to a request for comment.

U.S. President Donald Trump issued an executive order postponing enforcement of the law to April 5 shortly after taking office and said last month that he could further extend that deadline to give himself time to shepherd a deal.

According to legal filings from TikTok last year, global investors own about 58% of ByteDance, while the company's Singapore-based Chinese founder Zhang Yiming owns another 21% and employees of different nationalities - including about 7,000 Americans - own the remaining 21%.

The White House has been involved to an unprecedented level in the closely watched deal talks, effectively playing the role of investment bank.

Trump initially supported the establishment of the ban during his first term but in recent months has pledged to "save TikTok" and keep the app alive in the U.S., crediting it with helping him win the 2024 presidential election.

The app went dark briefly, then came back online shortly after Trump's inauguration, after he signed the executive order delaying enforcement of the ban by 75 days.

Trump said earlier this month that his administration was in touch with four different groups about a prospective TikTok deal, without identifying them.

Others vying to acquire the app include an investor group led by billionaire Frank McCourt and another involving Jimmy Donaldson, better known as the YouTube star Mr. Beast.

Reuters and others reported in January that Trump's administration was working on a plan for TikTok that would involve tapping Oracle and some existing ByteDance investors to take control of the app's operations.

Under the prospective deal, ByteDance would retain a stake in the company but data collection and software updates would be overseen by Oracle, which already provides the foundation of TikTok's infrastructure under an arrangement negotiated during Trump's first term.

(Reporting by Dawn Chmielewski in Los Angeles and Katie Paul in New York; Editing by Kenneth Li and Chizu Nomiyama)