Reddit gains 1.3% as court tentatively rejects Anthropic federal jurisdiction
State court decision keeps AI scraping case in local forum, removing near-term legal overhang
Reddit shares climbed 1.3% on Friday after a San Francisco court tentatively sided with the social media platform in its legal battle against Anthropic over alleged unauthorized data scraping for artificial intelligence training.
The San Francisco County Superior Court's decision keeps the case in state court rather than transferring it to federal jurisdiction, a victory for Reddit's legal strategy. Anthropic had argued that Reddit's claims were essentially copyright disputes that belonged in federal court, but Judge tentatively agreed with Reddit that its claims contain "extra elements" beyond those protected by the Copyright Act.
The lawsuit, filed in June 2025, alleges that Anthropic engaged in "industrial-scale" scraping of Reddit user comments without permission or compensation, violating Reddit's terms of service. Reddit's complaint includes state law claims of breach of contract, unjust enrichment, tortious interference, and unfair competition, which Anthropic characterized as "copyright-like claims artfully pleaded in contract and tort." The company has sought to move the case to federal court, arguing there is "no qualitative difference" between copyright claims and Reddit's state law claims.
For Reddit, keeping the case in state court provides strategic advantages, as state law offers broader avenues to protect data and terms of service than federal copyright law, which carries stricter requirements for proof. A Reddit spokesperson stated the case is "not about copyright at all", accusing Anthropic of mischaracterizing the complaint to distract from alleged misconduct.
The legal victory removes a near-term overhang for Reddit, which has struggled in 2026 despite strong fundamental performance. The stock is down approximately 39% year-to-date, trading around $140 per share as of mid-March, though analysts remain broadly bullish on the company's growth trajectory.
Reddit's fourth-quarter 2025 results showed revenue surging 70% year-over-year to $726 million, driven by a 75% increase in advertising revenue to $690 million. Daily active users grew 19% to 121 million, while advertising revenue per user climbed 42% to $5.98. The company generated $264 million in free cash flow and achieved a 35% net margin in the quarter.
Looking ahead to 2026, analysts project revenue between $3.0 billion and $3.1 billion, representing approximately 37% growth. A consensus of 29 Wall Street analysts shows 17 "Buy" ratings and 11 "Hold" recommendations, with an average price target of $242.19—more than 70% above current levels. The highest target sits at $320, while the most bearish forecast is $75.
The jurisdictional decision in the Anthropic case carries implications beyond this specific dispute. If Reddit succeeds in keeping the case in state court, it could encourage other platforms to pursue similar state law claims against AI companies rather than relying solely on federal copyright law. Conversely, an Anthropic victory would have limited the tools available to platforms to enforce terms of service against web scrapers.
Reddit's market capitalization stands at $27.3 billion following Friday's gain. The company trades at a trailing price-to-earnings ratio of 54.71 and a forward multiple of 34.97, reflecting investor expectations for continued growth. The stock remains well below its 52-week high of $282.95 but above its 52-week low of $79.75.