Genshin Impact Developer Agrees to $20 Million Settlement Over Child Privacy Claims

January 21, 2025 TruthUSA

The agreement with the FTC mandates that Cognosphere must erase personal information of all users aged under 13, unless they secure parental consent.

The creator of the online game Genshin Impact has consented to pay $20 million as part of a settlement regarding accusations of breaching children’s data privacy and misleading players into spending money on in-game loot boxes.

This settlement is tied to a complaint filed against Cognosphere Pte. Ltd., based in Singapore, along with its California subsidiary Cognosphere LLC, which operates in the U.S. under the name HoYoverse. The allegations suggest that the defendants “actively marketed” the free-to-download game Genshin Impact to younger audiences while collecting their private information, thereby violating the Children’s Online Privacy Protection Rule (COPPA), according to a statement from the FTC on January 17, the FTC.

The FTC contends that the company was aware that children under the age of 13 were using their services and “continued to gather personal information from children and utilize it without receiving parental consent or fulfilling other COPPA requirements.”

The company is also accused of sharing the gathered user data and device identifiers with third-party analytics businesses and advertisers, which tracked game progress, settings, purchases, and friends’ lists, according to the FTC.

Beyond COPPA violations, HoYoverse also faced allegations of misleading players, including minors, regarding the odds of winning specific loot boxes and the costs associated with opening these boxes. Cognosphere Pte is a subsidiary of the Chinese company miHoYo, located in Shanghai.

A loot box is a mystery package of digital items within a video game. Users must purchase loot boxes and only discover the specific items contained within after the transaction. The contents are randomized, and users generally hope to obtain something valuable.

In the game, players gather virtual characters, form teams, and utilize their powers to complete tasks. The most sought-after are “five-star” characters due to their superior abilities. These can only be obtained by opening loot boxes, purchased with virtual currency.

The in-game virtual currency system is said to be confusing and “misleads consumers regarding the amount of money players spend on loot boxes over time,” claimed the FTC. It was also alleged that the company “unfairly marketed” loot boxes by obscuring their “actual costs and misled all players about the probabilities of securing prizes.”

Samuel Levine, director of the FTC’s Bureau of Consumer Protection, accused Genshin Impact of having “deceived children, teenagers, and other players into spending substantial amounts of money on prizes they had little chance of winning.”

In a statement released on January 18, Cognosphere officials rejected the allegations, asserting that they “believe many of the FTC’s claims are inaccurate.”

“We agreed to this settlement because we value our community’s trust and are dedicated to transparency for our players,” they stated.

“Under this agreement, we will implement new age-gate and parental consent measures for children and young teens, along with enhancing our in-game disclosures regarding virtual currency and rewards for U.S. players in the coming months.”

Besides the $20 million payment, the settlement prohibits the companies from permitting children under 16 to purchase loot boxes without parental consent.

Players must be able to buy loot boxes with real money, not just in-game virtual currency, and the companies are obligated to explicitly disclose the odds of loot boxes.

Regarding the COPPA violation, the company is mandated to erase all personal information collected from users under 13, unless they secure parental consent to keep the data.

The settlement must be approved by a federal judge to take effect.

The FTC has previously taken similar actions against other gaming companies. In 2022, the developer of the online game Fortnite, Epic Games, consented to a $520 million penalty.

This payment was made to resolve accusations of COPPA infringements and claims that Epic used design strategies to trick users into unintended purchases.

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