Social media large Reddit has revealed that it’s below 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 Change Fee yesterday, submitted the day after the FTC inquiry was obtained.
“On March 14, 2024, we obtained a letter from the FTC advising us that the FTC’s workers is conducting a personal inquiry targeted 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 shocked that the FTC has expressed curiosity on this space.
“We don’t consider that we’ve engaged in any unfair or misleading commerce apply,” 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 person knowledge to coach its AI fashions. The settlement deepens the connection between the 2 corporations, with Reddit gaining larger visibility on Google’s platform in trade for its priceless knowledge.
“With the Reddit Information API, Google will now have environment friendly and structured entry to more energizing data,” Google stated on the time of the announcement. “In addition to enhanced alerts that may assist us higher perceive Reddit content material and show, prepare 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 every day, sees its knowledge as a key asset within the quickly rising AI market. “We consider our rising platform knowledge shall be a key ingredient within the coaching of main massive language fashions (“LLMs”) and function an extra monetization channel for Reddit,” the corporate said in its prospectus.
Nonetheless, the licensing of person 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 laws.
“These packages could topic us to evolving approaches to the regulation of this knowledge and implicates complicated and creating knowledge privateness and knowledge safety, misappropriation, and mental property legal guidelines, guidelines, and laws,” the corporate stated.
This isn’t the primary time Reddit’s AI ambitions have made headlines. As a part of its IPO plans, the corporate stated 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 cost for gross sales of sure digital items, which we could proceed to do sooner or later,” the corporate stated.
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 Information Company, Reddit famous that the worldwide AI market—even with out China and Russia—is anticipated to succeed in $1 trillion by 2027, with a compound annual development price of 20%.
Nonetheless, 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 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 alter our insurance policies or practices, divert administration and different assets from our enterprise, or in any other case adversely influence our enterprise, outcomes of operations, monetary situation, and prospects,” Reddit disclaimed within the submitting.