FTC Launches Investigation Into Reddit Amid IPO Plans

The United States Federal Trade Commission (FTC) sent a letter to social media giant Reddit on Friday over its data licensing practices for Artificial Intelligence (AI) training. The content of the letter suggests that the federal agency is currently investigating the company. Notably, this comes as Reddit prepares for its Initial Public Offering (IPO).

The Letter From U.S. FTC

Reddit has been considering an IPO for a very long time and at a point in 2021, it was seeking to secure over $15 billion for the offering to be launched in 2022.

On March 15, Reddit filed an amended Form S-1 registration statement with the U.S. SEC. In the updated IPO prospectus, Reddit confirmed that it received the letter. “On March 14, 2024, we received a letter from the FTC advising us that the FTC’s staff is conducting a non-public inquiry focused on our sale, licensing, or sharing of user-generated content with third parties to train AI models.” 

Reddit Files For IPO

Reddit submitted a filing for its IPO in February and also revealed plans to trade on the New York Stock Exchange under the ticker symbol “RDDT.” The social media firm also added Bitcoin (BTC) and Ethereum (ETH) to its balance sheet. For a company known for online advertising, diving into an IPO is another strategy to make more income. Its filing shows that it is now in the early stage of the data licensing efforts. 

According to Reddit, the IPO does not conflict with its existing business nor is it in misalignment with its values and the rights of its users. 

Looming Investigation Into Reddit Offering 

Reddit claimed not to be surprised by the FTC’s sudden interest in its offering considering the uniqueness of the technologies and business agreements. The company believes that there is nothing to fear, citing that it has not engaged in any form of unfairness or deceptive trade practices. At the same time, Reddit perceives that the investigation will be a long one with uncertainties.

Beyond the duration of the investigation, the company fears that it might incur substantial cost. Reddit is concerned that the FTC’s action would also impact on its reputation, leading to suspension or modification of its products, services, features, or functionalities.