Reddit Discloses FTC Probe into AI Data Licensing Ahead of IPO – Decrypt

Social media large Reddit has revealed that it’s below investigation by the Federal Commerce Fee (FTC) over its information 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 employees is conducting a private 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 aren’t stunned that the FTC has expressed curiosity on this space.

“We don’t imagine that now we have engaged in any unfair or misleading commerce observe,” the submitting notes.

The FTC probe follows a $60 million per 12 months deal Reddit signed with Google in February, granting the search large entry to Reddit’s huge trove of consumer information to coach its AI fashions. The settlement deepens the connection between the 2 corporations, with Reddit gaining higher visibility on Google’s platform in alternate for its worthwhile information.

“With the Reddit Knowledge API, Google will now have environment friendly and structured entry to more energizing info,” 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 probably 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 information as a key asset within the quickly rising AI market. “We imagine our rising platform information can be a key factor within the coaching of main massive language fashions (“LLMs”) and function an extra monetization channel for Reddit,” the corporate said in its prospectus.

Nevertheless, the licensing of consumer information for AI has raised issues amongst privateness advocates and regulators. In its submitting, Reddit acknowledged that its information licensing efforts are nonetheless within the early levels and topic to evolving rules.

“These packages could topic us to evolving approaches to the regulation of this information and implicates complicated and growing information privateness and information 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 stability 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 likewise acquired Ether and Matic as a type of cost for gross sales of sure digital items, which we could 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 progress charge of 20%.

Nevertheless, the FTC investigation highlights the regulatory challenges Reddit faces because it appears to capitalize on the AI growth. Regardless of the corporate’s confidence that it has not damaged any legal guidelines, Reddit acknowledged that the inquiry could possibly be prolonged and unpredictable.

“Any regulatory engagement could trigger us to incur substantial prices, and it’s potential for any regulatory engagement to end in reputational hurt or fines, trigger us to discontinue or modify our merchandise, companies, 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 impression our enterprise, outcomes of operations, monetary situation, and prospects,” Reddit disclaimed within the submitting.