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Reddit Under FTC Investigation Over AI Data Licensing Practices Amid IPO Preparations

Reddit, the well-known social media platform, is currently under investigation by the Federal Trade Commission (FTC) of the United States concerning its practices of licensing data for the training of artificial intelligence (AI).

This probe surfaces as Reddit is on the brink of launching its highly anticipated initial public offering (IPO).

The company disclosed the FTC’s investigation in an updated Form S-1 registration statement to the U.S. Securities and Exchange Commission on March 15, 2024, following a notification from the FTC the previous day.

In the filing, Reddit expressed that the FTC’s inquiry did not come as a surprise, attributing it to the “unique nature” of its technology and business partnerships.

Despite this, Reddit maintains its stance of innocence, asserting it has not participated in any unfair or deceptive trade practices.

This investigation sheds light on the regulatory challenges Reddit faces amidst AI’s increasing integration and acceptance.

While the company is confident in its compliance with laws, it acknowledges the investigation’s potential to be drawn-out and unpredictable.

Reddit stated, “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.”

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A significant aspect of the situation is Reddit’s $60 million annual deal with Google, established in February, which allows Google access to Reddit’s vast user data for AI training purposes.

This agreement not only enhances the relationship between Reddit and Google but also gives Reddit more visibility on Google’s platforms in exchange for its valuable data.

The use of user data for AI purposes has sparked concerns among privacy advocates and regulatory bodies.

Reddit acknowledges in its filing that its data licensing efforts are in their infancy and could be affected by changing regulations.

Reddit has been proactive in its approach to AI and cryptocurrency, revealing investments in Bitcoin and Ether as part of its financial strategy in preparation for its IPO.

The company also mentioned acquiring Ether and Polygon for virtual transactions on its platform.

As Reddit ventures into AI and cryptocurrency, it aims to leverage the growing market for these technologies.

Citing forecasts by the International Data Corporation, Reddit pointed out that the global AI market, excluding China and Russia, is expected to reach $1 trillion by 2027, with a 20% compound annual growth rate.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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