Social media large Reddit has revealed that it’s beneath investigation by the Federal Commerce Fee (FTC) over its knowledge licensing practices for synthetic intelligence coaching. The disclosure comes as the corporate prepares for its long-awaited preliminary public providing.
The disclosure appeared in an amended S-1 registration assertion filed with the Securities and Alternate Fee yesterday, submitted the day after the FTC inquiry was acquired.
“On March 14, 2024, we acquired a letter from the FTC advising us that the FTC’s workers is conducting a personal inquiry centered on our sale, licensing, or sharing of user-generated content material with third events to coach AI fashions,” Reddit said within the submitting. “Given the novel nature of those applied sciences and industrial preparations, we’re not shocked that the FTC has expressed curiosity on this space.
“We don’t imagine that we’ve engaged in any unfair or misleading commerce follow,” the submitting notes.
The FTC probe follows a $60 million per yr deal Reddit signed with Google in February, granting the search large entry to Reddit’s huge trove of consumer knowledge to coach its AI fashions. The settlement deepens the connection between the 2 firms, with Reddit gaining better visibility on Google’s platform in alternate for its worthwhile knowledge.
“With the Reddit Knowledge API, Google will now have environment friendly and structured entry to brisker data,” Google mentioned on the time of the announcement. “In addition to enhanced indicators that may assist us higher perceive Reddit content material and show, practice on, and in any other case use it in essentially the most correct and related methods.”
Reddit, which boasts over 100,000 lively communities and averages 1.2 million posts and seven.5 million feedback day by day, sees its knowledge as a key asset within the quickly rising AI market. “We imagine our rising platform knowledge shall be a key component within the coaching of main massive language fashions (“LLMs”) and function a further monetization channel for Reddit,” the corporate said in its prospectus.
Nonetheless, the licensing of consumer knowledge for AI has raised issues amongst privateness advocates and regulators. In its submitting, Reddit acknowledged that its knowledge licensing efforts are nonetheless within the early levels and topic to evolving rules.
“These applications might topic us to evolving approaches to the regulation of this knowledge and implicates complicated and growing knowledge privateness and knowledge safety, misappropriation, and mental property legal guidelines, guidelines, and rules,” the corporate mentioned.
This isn’t the primary time Reddit’s AI ambitions have made headlines. As a part of its IPO plans, the corporate mentioned that it had invested in Bitcoin and Ethereum as a part of its steadiness sheet technique forward of its IPO. The submitting additionally revealed that Reddit had acquired Ethereum and Polygon (MATIC) to pay for digital items on its platform.
“We invested a few of our extra money reserves in Bitcoin and Ether and in addition acquired Ether and Matic as a type of fee for gross sales of sure digital items, which we might proceed to do sooner or later,” the corporate mentioned.
Reddit’s foray into the world of AI and cryptocurrency comes as the corporate seeks to faucet into the rising marketplace for these applied sciences. Citing estimates from Worldwide Knowledge Company, Reddit famous that the worldwide AI market—even with out China and Russia—is anticipated to achieve $1 trillion by 2027, with a compound annual development charge of 20%.
Nonetheless, the FTC investigation highlights the regulatory challenges Reddit faces because it seems to be to capitalize on the AI increase. Regardless of the corporate’s confidence that it has not damaged any legal guidelines, Reddit acknowledged that the inquiry might be prolonged and unpredictable.
“Any regulatory engagement might trigger us to incur substantial prices, and it’s doable for any regulatory engagement to end in reputational hurt or fines, trigger us to discontinue or modify our merchandise, providers, options, or functionalities, require us to vary our insurance policies or practices, divert administration and different assets from our enterprise, or in any other case adversely affect our enterprise, outcomes of operations, monetary situation, and prospects,” Reddit disclaimed within the submitting.
