The United States Federal Trade Commission (FTC) is currently investigating social media giant Reddit for its data licensing practices related to artificial intelligence (AI) training. This investigation comes at a crucial time for Reddit as it prepares for its highly anticipated initial public offering (IPO).
In an amended Form S-1 registration statement filed with the U.S. Securities and Exchange Commission on March 15, 2024, Reddit disclosed the investigation after receiving notice from the FTC. The company acknowledged the FTC’s interest but maintained that it had not engaged in any unfair or deceptive trade practices.
This scrutiny from the FTC highlights the regulatory challenges that Reddit faces in light of the growing use and popularity of AI. While Reddit believes it has not violated any laws, it acknowledges that the investigation could be prolonged and uncertain. The filing states:
“Reddit entered into a $60 million annual agreement with Google in February, allowing the tech giant to utilize Reddit’s extensive user data for AI training. This deal further solidifies the relationship between Reddit and Google, with Reddit receiving increased exposure 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. Reddit acknowledges in its filing that its data licensing initiatives are still in their early stages and subject to evolving regulations.
Reddit’s interest in AI has garnered attention prior to its IPO preparations. The company disclosed its investments in Bitcoin and Ether as part of its financial strategy. Additionally, the filing 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 highlighted that the global AI market, excluding China and Russia, is projected to reach $1 trillion by 2027, with a compound annual growth rate of 20%.
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