The United States Federal Trade Commission (FTC) is currently investigating Reddit, the social media giant, for its practices regarding the licensing of data for artificial intelligence (AI) training. This investigation comes at a crucial time for Reddit as it prepares for its long-awaited initial public offering (IPO).
Reddit disclosed this investigation in an amended Form S-1 registration statement that was filed with the U.S. Securities and Exchange Commission on March 15, 2024. This statement was submitted the day after Reddit received notice about the FTC inquiry. In the filing, Reddit stated that it is not surprised by the FTC’s interest given the unique nature of its technologies and business agreements. However, the company firmly denied engaging in any unfair or deceptive trade practices.
This FTC scrutiny highlights the regulatory challenges that Reddit faces in light of the increasing popularity and use of AI. While Reddit maintains its innocence and believes that it has not violated any laws, it acknowledges that the investigation could be prolonged and uncertain. In its filing, Reddit stated:
“We have entered into a $60 million yearly agreement with Google in February, which allows Google to utilize our extensive user data for AI training purposes. This agreement strengthens our relationship with Google, as we receive increased exposure on their platform in exchange for our valuable data.”
The use of user data for AI has raised concerns among privacy advocates and regulators. Reddit conceded in its filing that its data licensing initiatives are still in their early stages and are subject to evolving regulations.
Reddit’s ambitions in the field of AI have attracted attention before. As part of its financial strategy for the IPO, the company has disclosed investments in Bitcoin and Ether. The filing also revealed that Reddit has acquired Ether (ETH) and Polygon (MATIC) for virtual transactions on its platform.
Reddit’s foray into AI and cryptocurrency aligns with its goal of capitalizing on the growing market for these innovations. 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%.
In a related magazine article, the incredible rags-to-riches tale of Polygon’s Sandeep Nailwal, Reddit’s investment in Polygon (MATIC) is highlighted, showcasing the company’s strategic moves in the cryptocurrency market.