The Federal Trade Commission (FTC) has launched an inquiry into Reddit’s strategy to license user-generated content for the purpose of training artificial intelligence (AI) models. This development surfaced in a regulatory filing made by Reddit just prior to its planned initial public offering (IPO).
According to Reddit, the FTC contacted the company on Thursday, revealing that its staff is conducting a non-public investigation specifically focused on Reddit’s sale, licensing, or sharing of user-generated content with third parties for AI model training. Reddit has previously indicated that these licensing agreements could serve as a significant revenue stream for the platform. In fact, the company recently announced a deal with Alphabet Inc.’s Google, allowing Google to leverage Reddit data for training its AI products. Additionally, Reddit disclosed in its filing that the licensing agreements it entered into in January are expected to generate a total of $203 million over the course of two or three years.
In response to the FTC inquiry, Reddit asserted in its filing that it does not believe it has engaged in any unfair or deceptive trade practices. The company stated that the FTC’s letter indicated an interest in meeting with Reddit to gather more information about its plans, and that the FTC intends to request additional information and documents as the investigation progresses.
This regulatory scrutiny comes at a critical time for Reddit, as the platform prepares for its IPO. The outcome of the FTC inquiry could have implications for Reddit’s business model and its ability to generate revenue through the licensing of user-generated content for AI training purposes.