Will The Current US FTC Probe Mar Reddit IPO Success?

The Reddit IPO is a major public market event many Wall Street and finance veterans are looking forward to at the moment. Notably, the latest probe from the United States Federal Trade Commission (FTC) probe into the firm’s AI licensing policy is stirring a buzz in the industry at the moment.

Reddit IPO and FTC Probe

It is not uncommon for Federal regulators to probe companies eyeing public listing. The update on the FTC inquiry was shared as a new disclosure in the latest Reddit IPO prospectus but the company dismissed any form of threat altogether.

The inquiry from the FTC staff hinges on Reddit’s plans to license its user-generated content to AI development companies who wish to use it to train their data. In the major instance unveiled, the company initiated an agreement with Google worth $60 million that will see the tech giant gain access to the user content as highlighted.

“The letter indicated that the FTC staff was interested in meeting with us to learn more about our plans and that the FTC intended to request information and documents from us as its inquiry continues,” the company said.

Reddit noted that it was not surprised the FTC took interest in the deal seeing the deal “given the novel nature of these technologies and commercial arrangements.”

The development of Artificial Intelligence over the past year has raised a lot of privacy issues with lawmakers around the world calling for robust AI regulation. Despite the lurking concerns, Reddit is unperturbed by the chances of the IPO success as it claimed it has not violated US Consumer Protection Laws. 

Likely Precedents in Crypto Ecosystem

There are different instances of probes in the United States, many of which have largely impaired the chances of eligible crypto companies looking to go public. The long-term lawsuit between the United States Securities and Exchange Commission (SEC) and blockchain payments firm Ripple Labs has prevented the firm from exploring IPO options all this while.

The thin line between regulatory vetting for IPO and probes becomes visible with the approval of the Coinbase Global Inc. debut on Nasdaq in 2021. Despite clearing it for listing, the markets regulator is currently in an active lawsuit with the company as it claimed Coinbase is supporting the trading of unregistered securities.

The Reddit IPO has suffered a significant delay and if eventually successful, the company might bag a market valuation of $6.4 billion per an earlier report from Coingape.