Reddit is being probed by the FTC over its AI data-licensing practices prior to its IPO.

• The FTC is currently investigating Reddit's data-licensing practices, as stated in an updated IPO prospectus on Friday.
• Reddit is planning to sell shares for $31 to $34 each in its offering, potentially valuing the company at approximately $6.5 billion.
• During a historically slow period for tech IPOs, Reddit is considering going public.

The Federal Trade Commission sent a letter to Reddit regarding its data-licensing business for training artificial intelligence systems, as stated by Reddit on Friday.

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Reddit stated that the opportunity does not clash with our values and the rights of our users and moderators.

The 19-year-old company is planning to sell shares in its IPO at a price range of $31 to $34, which would value the business at approximately $6.5 billion. Reddit is looking to go public during a time when tech IPOs are historically slow, with the last notable venture-backed tech debut occurring in September 2021. The market has been largely shuttered since late 2021.

Last year, Reddit's revenue increased by 20% to $804 million, with 98% of its sales coming from advertising and the remaining 2% from data licensing.

An FTC spokesperson declined to comment.

In January, Reddit entered into data licensing deals worth $203 million over two to three years. The company anticipates recognizing at least $66.4 million from these agreements in 2024.

In the same week that Reddit filed for its IPO, it was announced that the company had expanded its partnership with the search giant, granting the search giant access to data to train its AI models, among other uses.

The company stated in its prospectus that it believes its expanding platform data will play a crucial role in training top-tier large language models ("LLMs") and also serve as an additional revenue stream for Reddit.

The FTC's interest in the matter is not surprising, given the unique nature of these technologies and business practices.

"Reddit stated that they do not believe they have engaged in any unfair or deceptive trade practices. The FTC staff expressed interest in meeting with them to learn more about their plans and requested information and documents as their inquiry continues."

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