Social media giant Reddit is being investigated by the United States Federal Trade Commission (FTC) over its data licensing practices for artificial intelligence (AI) training. The investigation comes amid the company’s preparation for its long-awaited initial public offering (IPO).
Reddit revealed the investigation in an amended Form S-1 registration statement filed with the U.S. Securities and Exchange Commission on March 15, 2024, submitted the day after receiving notice about the FTC inquiry.
Reddit mentioned in the filing that it is not surprised by the FTC’s interest due to the unique nature of the technologies and business agreements. However, Reddit insisted it had not engaged in unfair or deceptive trade practices.
The FTC scrutiny underscores Reddit’s regulatory hurdles amid the growing popularity and use of AI. While Reddit believes it hasn’t violated laws, it admits the investigation might be prolonged and uncertain. 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.”
Reddit struck a $60 million yearly agreement with Google in February, allowing the tech giant to utilize Reddit’s extensive user data for AI training. This deal strengthens ties between Reddit and Google, with Reddit receiving increased exposure on Google’s platform in return for its valuable data.
Related: OpenAI’s Mira Murati is “not sure” where Sora’s training data comes from
Using user data for AI has sparked worries among privacy advocates and regulators. Reddit conceded in its filing that its data licensing initiatives are nascent and subject to evolving regulations.
Reddit’s AI aspirations have previously garnered attention. In its IPO preparations, the company disclosed investments in Bitcoin and Ether as part of its financial strategy. Additionally, the filing disclosed Reddit’s acquisition of Ether (ETH) and Polygon (MATIC) for virtual transactions on its platform.
Reddit’s venture into AI and cryptocurrency aligns with its aim to capitalize on the expanding market for these innovations. Referring to projections by the International Data Corporation, Reddit highlighted that the worldwide AI market, excluding China and Russia, is projected to hit $1 trillion by 2027, boasting a 20% compound annual growth rate.
Magazine: Slumdog billionaire: Incredible rags-to-riches tale of Polygon’s Sandeep Nailwal