Reddit is currently under investigation by the United States Federal Trade Commission (FTC) regarding its data licensing practices for artificial intelligence (AI) training. This investigation coincides with Reddit’s preparation for its highly anticipated initial public offering (IPO).
The investigation was disclosed in an amended Form S-1 registration statement filed with the U.S. Securities and Exchange Commission on March 15, 2024, following notice of the FTC inquiry received the previous day. Reddit acknowledged the FTC’s interest but maintained it had not engaged in unfair or deceptive trade practices.
The FTC’s scrutiny highlights the regulatory challenges Reddit faces in the midst of the growing adoption of AI technologies. While Reddit believes it has complied with laws, it acknowledges the potential for prolonged and uncertain outcomes from the investigation.
According to Reddit’s filing, regulatory engagement could incur substantial costs, result in reputational harm, fines, require modifications to products or practices, or divert resources from its core business operations.
In February, Reddit entered a $60 million annual agreement with Google, allowing the tech giant to utilize Reddit’s user data for AI training purposes. This collaboration strengthens the relationship between Reddit and Google, with Reddit receiving increased visibility on Google’s platform in exchange for its valuable data.
The use of user data for AI training has raised concerns among privacy advocates and regulators, prompting Reddit to acknowledge the evolving regulatory landscape surrounding its data licensing initiatives.
In addition to its AI endeavors, Reddit’s IPO preparations have revealed investments in Bitcoin and Ether as part of its financial strategy. Moreover, the company’s acquisition of Ether and Polygon for virtual transactions on its platform underscores its venture into the cryptocurrency space.
Reddit’s expansion into AI and cryptocurrency aligns with its strategic goal to capitalize on the growing market for these innovations. Citing projections by the International Data Corporation, Reddit highlighted the substantial growth potential of the global AI market, further emphasizing its commitment to these areas of development.
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