Reddit faces FTC investigation into AI data practices ahead of IPO

Social media giant Reddit is being investigated by the US Federal Trade Commission (FTC) over its data consent practices for artificial intelligence (AI) training. The investigation comes as the company prepares for its long-awaited initial public offering (IPO).

Reddit disclosed the investigation in an amended Form S-1 filed with the US Securities and Exchange Commission on March 15, 2024, the day after it received notice of the FTC's request.

Reddit noted in its filing that it was not surprised by the FTC's interest because of the unique nature of its technologies and business deals. However, Reddit insists it does not engage in unfair or deceptive business practices.

The FTC investigation underscores reddit's regulatory hurdles to the growing popularity and use of AI. While Reddit believes it has not broken any rules, it acknowledges that the investigation could be lengthy and uncertain. The reddit file says:

“Any regulatory involvement could cause us to incur significant costs, and any regulatory involvement could result in reputational damage or penalties, cause us to discontinue or change our products, services, features or operations, require us to change our policies, or practices, divert management and other resources from our business; or otherwise adversely affect our business, operations, financial condition and prospects.

Reddit struck a $60 million annual deal with Google in February, allowing the tech giant to use Reddit's vast user data for AI training. This contract strengthens the relationship between Reddit and Google, with Reddit accepting exposure of its valuable data on Google's platform in return.

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Using user data for AI has raised concerns among privacy advocates and regulators. Reddit acknowledged in its filing that its data-licensing initiatives are still in their infancy and are subject to evolving regulations.

Reddit's AI ambitions have attracted attention in the past. In the IPO event, the company disclosed investments in Bitcoin and Ether as part of its financial strategy. Additionally, the archive announced the acquisition of Reddit Ether (ETH) and Polygon (MATIC) for virtual transactions on the platform.

Reddit's foray into AI and cryptocurrency fits with its aim to tap into the expanding market for these innovations. Citing a forecast by the Global Information Corporation, Reddit said that excluding China and Russia, the global AI market in 2018 It is predicted to reach $1 trillion by 2027, representing a compound annual growth rate of 20%.

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