The Federal Trade Commission announced Friday that GenshinImpact Developer Cognosphere has agreed to a $20 million settlement and several restrictions on how it sells its loot boxes and handles children’s personal data. According to the FTC, the company “actively marketed” its loot boxes to children and misled players about their chances of winning prizes.
Cognosphere also allegedly “misled children and other users about the true costs of in-game transactions,” by asking them to purchase virtual money involving multiple currency exchanges. Players often spent “hundreds of dollars on prizes they had little chance of winning,” according to Bureau of Consumer Protection Director Samuel Levine. For years, loot boxes have been considered a form of legal gambling.
The complaint, filed by the Department of Justice, also accuses the GenshinImpact developer marketing to children using approaches such as social media posts and in-game banners. The company then allegedly collected their personal information in violation of the Children’s Online Privacy Protection Rule. Once the settlement is approved, the company is required to delete all data of children under the age of 13 whose parents have not consented to the collection of their data.
Other requirements of the rulebook include that Cognosphere must offer the ability to purchase loot boxes directly and not just via virtual money. It is also prohibited from misrepresenting the prices, features, and chances of winning loot boxes, and it must disclose exchange rates for virtual currency at multiple levels.
