FTC Opens Inquiry Into Reddit's AI Data-Licensing and User Consent

In January 2024, Reddit entered into data-licensing agreements with a total contract value of roughly $203 million over two to three years. The most publicized was a deal with Google reported at around $60 million per year, an arrangement that also gave Reddit access to Google AI models for improving its internal site search and other features. The deals were a centerpiece of Reddit's pre-IPO revenue story; the company's offering paperwork projected a price valuing the 18-year-old platform at up to $6.4 billion, and Reddit went public on March 21, 2024, under the ticker RDDT.

On March 14, 2024, Reddit received a letter from the Federal Trade Commission stating that FTC staff were conducting a non-public inquiry focused on Reddit's sale, licensing, or sharing of user-generated content with third parties to train AI models. Reddit disclosed the inquiry the next day in an amended IPO prospectus filed with the SEC, noting that the letter indicated FTC staff wanted to meet with the company and intended to request information and documents as the inquiry continued. The timing, days before the IPO, drew significant attention, since Reddit's archive of 17 billion posts and comments was seen by AI experts as valuable for training chatbots in the art of conversation.

The inquiry landed amid wider FTC scrutiny of the AI data economy. Reddit was not the only company to receive an FTC letter about data licensing, and in January 2024 the agency had announced it was requesting information from Microsoft and OpenAI about their multibillion-dollar relationship, with Amazon, Google, and Anthropic also questioned about their partnerships. FTC chair Lina Khan described the agency's concern as whether partnerships between big companies and AI upstarts would lead to unfair competition.

The episode crystallized a broader content-ownership and consent debate. Privacy advocates and digital-rights groups argued that users post on Reddit for discussion and community, not to have their often deeply personal contributions used to train commercial AI models, and that users receive no compensation and never meaningfully consented to having their words sold.

This tension echoed the 2023 API-pricing revolt, in which users staged a rebellion that shut down parts of Reddit for days. The potential for further user protests was one of the main risks Reddit disclosed to potential investors ahead of its trading debut, until the FTC letter arrived and added a regulatory risk on top of the community one.