Reddit Faces FTC Probe Over AI Data Practices Ahead of IPO – The United States Federal Trade Commission (FTC) is investigating Reddit, the prominent social media platform, regarding its practices concerning the licensing of data for the training of artificial intelligence (AI). This inquiry arises as Reddit prepares for its highly anticipated initial public offering (IPO).
Reddit disclosed this investigation in a revised Form S-1 registration statement filed with the U.S. Securities and Exchange Commission on March 15, 2024, which was submitted the day after the company was notified about the FTC’s inquiry. In the filing, Reddit acknowledged the FTC’s interest, attributing it to the distinctive technologies and business agreements involved.
However, Reddit emphasized that it has not participated in any unfair or deceptive trade practices. The scrutiny from the FTC highlights the regulatory challenges Reddit faces amidst the increasing popularity and utilization of AI. While Reddit maintains it has not violated any laws, it acknowledges that the investigation could be prolonged and its outcome uncertain.
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Reddit’s filing states: “Any regulatory engagement may cause us to incur substantial costs, and it is possible for any regulatory engagement to result in reputational harm or fines, cause us to discontinue or modify our products, services, features, or functionalities, require us to change our policies or practices, divert management and other resources from our business, or otherwise adversely impact our business, results of operations, financial condition, and prospects.”
In February, Reddit entered into a $60 million annual agreement with Google, granting the tech giant access to Reddit’s vast user data for AI training purposes. This arrangement deepens the relationship between Reddit and Google, as Reddit gains heightened visibility on Google’s platform in exchange for providing its valuable data.
Concerns among privacy advocates and regulators have been raised regarding the utilization of user data for AI purposes. In its filing, Reddit acknowledged that its initiatives in data licensing are in their early stages and are subject to evolving regulations.
Reddit’s aspirations in AI have attracted attention previously. As part of its financial strategy in preparation for its IPO, the company disclosed investments in Bitcoin and Ether. Furthermore, the filing revealed Reddit’s acquisition of Ether and Polygon for virtual transactions on its platform.
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Reddit’s exploration of AI and cryptocurrency is in line with its objective to capitalize on the expanding market for these technologies. Citing projections from the International Data Corporation, Reddit emphasized that the global AI market, excluding China and Russia, is expected to reach $1 trillion by 2027, with a compound annual growth rate of 20%.
