Reddit stock climbed Monday after the social-networking site notched a major win in its legal battle against artificial-intelligence giant Anthropic.

California Judge Harold Kahn ruled over the weekend that Reddit has provided enough evidence to allege that Anthropic and Reddit are contractually bound by Reddit's User Agreement. This comes after Anthropic filed a demurrer, which is a legal challenge that states that even if all the facts in the plaintiff's complaint are true, they don't establish a valid legal claim.

"This ruling sends a strong message-AI companies don't get a free pass to ignore the law. AI companies cannot scrape data without a license in violation of basic contract law, user privacy commitments and fair business practices," a Reddit spokesperson said in a statement.

Anthropic didn't immediately respond to a request for comment.

Reddit stock rose 4.5% on Monday to $157.64.

Reddit sued Anthropic in June 2025 for allegedly scraping its user data to train large-language model Claude without Reddit's permission. Reddit says its website clearly states rules that prohibit companies from using the company's data without consent.

An Anthropic spokesperson told Barron's in June 2025 that "we disagree with Reddit's claims and will defend ourselves vigorously."

Anthropic argued in its demurrer that Reddit's allegations were basically copyright claims. That would allow Anthropic to argue "fair use," which is a legal doctrine that allows for the unlicensed use of copyrighted materials in some instances.

That isn't how Kahn sees it, however.

"Anthropic engaged in conduct sufficient to infer actual knowledge of the terms of the User Agreement and to form an implied-in-fact contract with Reddit," he said in his ruling.

Reddit does share its user data, but for a price. Alphabet and OpenAI both have multimillion-dollar contracts with Reddit where they pay the social site to use that data to train their AI models.

Anthropic might have to follow suit.

"If I'm an Anthropic, I'm going to be a little bit concerned here because the language the judge is using suggests the judge is already generally seeing facts that are not favorable to Anthropic," Kirk Sigmon, founding partner of KellDann Law, told Barron's.

Sigmon expects that Anthropic will likely try to settle the case with Reddit. He predicts that the settlement would potentially include some sort of retroactive payment from Anthropic to cover what it has already used to already train its models, and that Anthropic would then try to enter an official licensing agreement with Reddit.

"I think if you're holding Reddit stock right now you're relieved because it shows you that, again, that license model is working and that there's going to be money coming in," Sigmon said.

Meanwhile, Alphabet and OpenAI's contracts with Reddit are both up for renewal. Investors want to see Reddit walk away from negotiations with much bigger deals, as the company argues their data are incredibly valuable. Barron's points out in a recent stock pick that if talks go well, the contract renewals could unlock hundreds of millions of dollars in new profit, and be a boon for the stock.