Reddit Discloses FTC Probe into AI Data Licensing Ahead of IPO

by Ron Effertz

Social media extensive Reddit has published that it’s miles beneath investigation by the Federal Commerce Payment (FTC) over its info licensing practices for artificial intelligence coaching. The disclosure comes as the firm prepares for its long-awaited preliminary public providing.

The disclosure appeared in an amended S-1 registration insist filed with the Securities and Alternate Payment yesterday, submitted the day after the FTC inquiry used to be got.

“On March 14, 2024, we got a letter from the FTC advising us that the FTC’s workers is conducting a non-public inquiry centered on our sale, licensing, or sharing of user-generated insist with third parties to relate AI devices,” Reddit acknowledged within the filing. “Given the unique nature of those technologies and industrial preparations, we’re no longer stunned that the FTC has expressed passion in this arena.

“We end no longer bear in mind that we hang engaged in any unfair or spurious trade prepare,” the filing notes.

The FTC probe follows a $60 million per 365 days deal Reddit signed with Google in February, granting the search extensive entry to Reddit’s extensive trove of user info to relate its AI devices. The settlement deepens the connection between the two firms, with Reddit gaining higher visibility on Google’s platform in switch for its precious info.

“With the Reddit Data API, Google will now hang efficient and structured entry to fresher info,” Google stated on the time of the announcement. “Apart from enhanced indicators that can abet us higher realize Reddit insist and uncover, relate on, and otherwise employ it within the most correct and connected strategies.”

Reddit, which boasts over 100,000 inspiring communities and averages 1.2 million posts and 7.5 million feedback on day by day foundation, sees its info as a key asset within the mercurial growing AI market. “We bear in mind our growing platform info will seemingly be a key aspect within the coaching of main successfully-organized language devices (“LLMs”) and abet as an additional monetization channel for Reddit,” the firm acknowledged in its prospectus.

On the opposite hand, the licensing of user info for AI has raised concerns amongst privacy advocates and regulators. In its filing, Reddit acknowledged that its info licensing efforts are still within the early levels and arena to evolving rules.

“These purposes might furthermore arena us to evolving approaches to the regulation of this info and implicates complicated and creating info privacy and info protection, misappropriation, and intellectual property laws, rules, and rules,” the firm stated.

This is no longer the most important time Reddit’s AI ambitions hang made headlines. As fragment of its IPO plans, the firm stated that it had invested in Bitcoin and Ethereum as fragment of its steadiness sheet approach earlier than its IPO. The filing also published that Reddit had got Ethereum and Polygon (MATIC) to pay for virtual items on its platform.

“We invested about a of our extra cash reserves in Bitcoin and Ether and also got Ether and Matic as a develop of fee for sales of sure virtual items, which we might furthermore continue to full sometime,” the firm stated.

Reddit’s foray into the arena of AI and cryptocurrency comes as the firm seeks to faucet into the growing market for these technologies. Citing estimates from World Data Company, Reddit infamous that the arena AI market—even without China and Russia—is predicted to attain $1 trillion by 2027, with a compound annual growth rate of 20%.

On the opposite hand, the FTC investigation highlights the regulatory challenges Reddit faces as it appears to be like to capitalize on the AI utter. Despite the firm’s self belief that it has no longer broken any laws, Reddit acknowledged that the inquiry might be prolonged and unpredictable.

“Any regulatory engagement might furthermore place off us to incur extensive prices, and it’s miles feasible for any regulatory engagement to result in reputational harm or fines, place off us to quit or alter our products, companies and products, elements, or functionalities, require us to exchange our policies or practices, divert administration and other sources from our enterprise, or otherwise adversely impression our enterprise, outcomes of operations, financial condition, and potentialities,” Reddit disclaimed within the filing.

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