Reddit Sues AI Startup Anthropic Over Unfair Competition Allegations

• Reddit Inc. (RDDT) shares jumped over 7% to $118.83, reaching a $22 billion market cap, after filing a lawsuit against Anthropic for breaching contract and using user data without consent to train AI models like Claude.
• The lawsuit, filed in San Francisco, accuses Anthropic, valued at $61.5 billion with backing from Amazon (AMZN), of violating Reddit’s user agreement, unlike OpenAI and Google (GOOGL), which have licensing deals respecting Reddit’s terms.
• Reddit seeks damages and a jury trial to enforce Anthropic’s compliance, aiming to protect its user community and capitalize on its data’s value in the AI landscape, bolstered by its platform’s role since the 2022 ChatGPT-driven AI boom.

Reddit Inc. (RDDT) saw its shares surge more than 7% to $118.83 in midday trading on Wednesday, boosting its market capitalization to $22 billion, following the announcement of a lawsuit against artificial intelligence startup Anthropic for breach of contract and unauthorized use of its platform’s data, as reported by CNBC. The San Francisco-based legal action alleges that Anthropic, valued at $61.5 billion in a March funding round led by Lightspeed Venture Partners with backing from Amazon.com Inc. (AMZN), Salesforce Ventures, and Cisco Investments, has been training its AI models, including Claude, on Reddit users’ personal data without consent, violating the social media company’s user agreement. Reddit’s filing sharply criticizes Anthropic, dismissing its “white knight” branding and accusing it of disregarding platform rules to exploit user-generated content for commercial gain, a practice Reddit claims harms its community and business.

The lawsuit underscores Reddit’s pivotal role in the generative AI landscape, with its 20-year-old platform serving as a critical data source for large language models since the AI boom sparked by OpenAI’s ChatGPT launch in late 2022. Unlike Anthropic, Reddit has secured licensing agreements with OpenAI and Alphabet Inc.’s Google (GOOGL), allowing these companies to use its content while adhering to strict privacy and usage terms, a standard Reddit says Anthropic has failed to meet. OpenAI CEO Sam Altman, a former Reddit board member with a stake now valued over $1 billion, highlights the deepening ties between Reddit and major AI players, contrasting with Anthropic’s alleged non-compliance.

Reddit’s legal action seeks damages and a jury trial to enforce Anthropic’s adherence to its contractual and legal obligations, emphasizing the company’s commitment to protecting its community of users from unauthorized commercial exploitation. The filing reflects Reddit’s broader strategy to monetize its vast user-generated data while safeguarding user rights, a move that has resonated with investors, as evidenced by the stock’s strong performance post-announcement. Since its 2024 IPO, Reddit has solidified its position as a key player in both social media and AI data markets, leveraging its $22 billion valuation to assert control over how its platform’s content is utilized by AI firms.

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