Reddit makes $350m a year in advertising revenue, it is in theory a fantastically successful business that could make plenty of profit for its shareholders.
The problem is solely down to them raising more and more capital the latest at a $10B valuation. Because of this they need to increase the revenue even further to try and justify the inflated valuation and that is what has led to the latest situation.
There may be some complexity with legality here though. Obviously Google and other search engines already have most of Reddit's content indexed, but there are some legal arguments as to whether they can use the content to create derivative works.
If Reddit opens up its API and specifically allows AI companies to use the content to create LLMs and other AI tools then from a legal point of view they may find this much more preferable to facing potential legal action further down the road.