The Federal Trade Commission announced on Friday that Genshin Impact developer Cognosphere has agreed to a $20 million settlement and several restrictions on how it sells its loot boxes and manages children’s personal data. According to the FTC, the company “actively marketed” its loot boxes to children and misled players about their odds of winning prizes.
Cognosphere allegedly also “deceived children and other users about the real costs of in-game transactions,” by requiring them to buy virtual money that involved multiple currency exchanges. Players often spent “hundreds of dollars on prizes they stood little chance of winning,” according to Bureau of Consumer Protection Director Samuel Levine. For years, loot boxes have been likened to a form of legal gambling.
The complaint, filed by the Department of Justice, also accuses the Genshin Impact developer of marketing to kids using approaches like posts on social media channels 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 any data for children under 13 whose parents haven’t consented to their data being collected.
Other requirements of the settlement include that Cognosphere must offer an option to buy loot boxes directly and not just through virtual money. It’s also forbidden from misrepresenting pricing, features, and winning odds for loot boxes, and it must disclose exchange rates for multi-tiered virtual currency.