Genshin Impact Developer Fined $20 Million to Settle FTC Charges

Singapore-Based Cognosphere Prohibited from Selling Loot Boxes to Teens Under 16 Without Parental Consent

The Federal Trade Commission (FTC) announced on Friday that Genshin Impact developer Cognosphere has agreed to a $20 million settlement and will face several restrictions on how it sells loot boxes and handles children's personal data. The FTC claims that the company "actively marketed" its loot boxes to children and misled players about their odds of winning prizes.

Cognosphere is also accused of "deceiving children and other users about the true costs of in-game transactions" by requiring purchases of virtual currency that involved multiple currency exchanges. According to Bureau of Consumer Protection Director Samuel Levine, players often ended up spending “hundreds of dollars on prizes they stood little chance of winning.” For years, loot boxes have been compared to a form of legal gambling.

The complaint, filed by the Department of Justice, further alleges that Cognosphere marketed directly to children through social media posts and in-game banners. Additionally, the company is accused of collecting personal information from children in violation of the Children’s Online Privacy Protection Rule. Following the settlement, the company will be required to delete any data of children under 13 whose parents did not consent to its collection.

As part of the settlement, Cognosphere must offer players the option to purchase loot boxes directly, rather than only through virtual money. The company is also prohibited from misleading players about pricing, features, and winning odds of loot boxes, and must clearly disclose exchange rates for multi-tiered virtual currency.