The FTC Hypocritically Hits Genshin Impact Devs with a $20 Million Fine for “Deceiving Children With Loot Boxes” While Sports Games are Ignored

In a move that could raise eyebrows amidst the growing tensions between the U.S. and China over potential tariffs, the Federal Trade Commission (FTC) has issued a surprisingly small $20 million fine to the developers of the free-to-play gacha game Genshin Impact.

The complaint, filed by the Department of Justice after a referral from the Commission, claims that the Singapore-based Cognosphere Pte. Ltd and its California subsidiary, Cognosphere LLC (doing business as HoYoverse), marketed Genshin Impact to children and illegally collected personal data from them, violating the Children’s Online Privacy Protection Act (COPPA).

But that’s not all, the FTC’s primary grievance centers on HoYoverse’s predatory loot box mechanics, accusing them of misleading children with false odds for obtaining rare five-star items. Samuel Levine, the Director of the FTC’s Bureau of Consumer Protection, stated that Genshin Impact tricked young players into “spending hundreds of dollars on prizes they stood little chance of winning.”

He further emphasized that companies employing these “dark-pattern” tactics will face consequences if they deceive players, especially minors, about the true costs of in-game purchases.

As much as I personally stand against defending gacha games, especially those like Genshin Impact, developed by the Chinese (considering Tencent’s shady role in promoting financially-backed ESG initiatives and being labeled a Chinese military company), I can’t help but feel the FTC’s position on this matter is fundamentally flawed and biased.

Genshin Impact is a free-to-play game, but it generates significant revenue from in-game virtual currency and other paid content to the tunes of tens of millions of dollars each and every month, in fact Genshin Impact has been so lucratively profitable it has netted HoYoverse billions of dollars since 2021.

Players collect virtual heroes, forming teams, and using these heroes’ abilities to complete tasks. The five-star heroes are the most coveted due to their power, and they can only be acquired by “pulling” for them in specific banners, basically loot boxes.

Players can use virtual currency, which can be either farmed for free or purchased with real-world money to bypass the grind and guarantee they get the characters they want.

The complaint argues that the game’s purchasing system hides the reality that players often need to spend large sums of real money to obtain “five-star prizes,” and that some children have spent hundreds, even thousands, of dollars on them.

The FTC claims that the process is overly complex and confusing, particularly for children and teens. Players must first exchange real money for virtual currency, then repeatedly exchange that currency to open loot boxes, with confusing exchange rates and denominations.

According to the complaint, this system misleads consumers about how much money they’re actually spending on loot boxes, and how much they’d likely need to spend to obtain specific prizes.

Furthermore, the complaint takes issue with HoYoverse’s failure to comply with the Children’s Online Privacy Protection Act (COPPA), which requires services targeting children under 13 to notify parents about data collection and obtain verifiable parental consent before collecting and using any personal information.

The complaint asserts that Genshin Impact qualifies as a child-directed online service that collects personal information from users under 13, making it subject to COPPA’s requirements. As such, HoYoverse was obligated to notify parents about the data it collected from children and obtain parental consent before gathering any personal information.

However, the complaint alleges that despite being fully aware of children under 13 using its platform, HoYoverse continued to collect and utilize their personal data without parental consent or adherence to COPPA regulations. Furthermore, the company reportedly shared user IDs and persistent device-related identifiers with third-party analytics firms and advertisers, allowing them to track player progress, purchases, settings, and friends lists.

Under the proposed order, pending approval by a federal judge before taking effect Cognosphere Pte. Ltd and Cognosphere LLC will be required to pay a $20 million penalty and implement corrective measures to address the alleged violations. These measures include:

• Banning loot box purchases by children under 16 without a parent’s explicit consent.
• Prohibiting the sale of loot boxes using virtual currency unless players have the option to purchase them directly with real money.
• Preventing misrepresentation of loot box odds, pricing, and features.
• Mandating clear disclosure of loot box odds and the exchange rates for multi-tiered virtual currency.
• Requiring the deletion of all previously collected personal information from children under 13 unless parental consent is obtained for retention.
• Enforcing full compliance with COPPA, including its parental notice and consent provisions.

The Commission voted unanimously (5-0) to refer the complaint and stipulated order to the Department of Justice for filing. However, Commissioners Andrew Ferguson and Melissa Holyoak concurred on Counts I-II but dissented on Counts III-V.

Additionally, Commissioners Ferguson and Slaughter issued separate statements. Following the referral, the Department of Justice officially filed the complaint and stipulated order in the U.S. District Court for the Central District of California.

The FTC asserts that Genshin Impact primarily targets children under 13, despite being rated T for Teen by the Entertainment Software Rating Board (ESRB) indicating suitability for players aged 13 and up, likely due to its depiction of cartoon violence and alcohol references.

However, international rating bodies differ slightly in their assessments. PEGI, which governs European game ratings, classifies Genshin Impact as suitable for ages 12 and older. Meanwhile, Australia has assigned the game an MA15+ rating, while Japan’s CERO has labeled it CERO B, also meaning suitable for players aged 12 and up.

The FTC’s case against HoYoverse for alleged COPPA violations seems contradictory, given that Genshin Impact is rated T for Teen by the ESRB, meaning it is not intended for children under 13. If children are playing the game unmonitored, that reflects a failure of parental oversight rather than an issue with the game’s policies.

While the FTC claims that HoYoverse improperly collected data from minors, enforcing COPPA on a Teen-rated game raises questions about whether the responsibility falls on the developer or on parents who allow underage access. Given that Genshin Impact is a free-to-play game, virtually anyone with basic technical knowledge can create an account and start playing, regardless of age.

However, making in-game purchases is an entirely different matter, as it requires a credit/debit card or PayPal, introducing a layer of parental oversight that complicates the FTC’s argument.

The Federal Trade Commission (FTC) has ordered HoYoverse, the developer of Genshin Impact, to enforce stricter age verification measures and obtain parental consent for players under 16. This includes providing clearer disclosures regarding in-game transactions and the probability of obtaining rare items.

However, it’s worth noting that Genshin Impact already transparently displays the odds for its loot boxes (Wishes) within the game itself.

The “Details” section of each banner clearly outlines the drop rates for 5-star and 4-star items, including the pity system, which guarantees high-rarity drops after a set number of pulls. This level of transparency directly contradicts claims that HoYoverse is misleading players about gacha odds.

If players, especially minors fail to understand these probabilities, the issue lies more with personal responsibility and inadequate parental oversight rather than any deliberate deception on the company’s part.

I find it rather amusing that the FTC argues Genshin Impact is targeting children simply because it features “child characters” like Paimon, Qiqi, and Klee. This claim seems absurd, considering that the majority of playable characters in the game are inspired by deities, and in Paimon’s case, demonology.

Paimon shares a name with King Paimon, a powerful demon listed in the Ars Goetia, part of The Lesser Key of Solomon. In demonology, King Paimon is associated with knowledge, secrets, and guidance, often depicted riding a camel with a host of spirits, not exactly what one would consider “child-friendly” or something designed to pander to players 12 and younger.

Additionally, the FTC claims that Genshin Impact panders to children by featuring multiplayer minigames like hide and seek. However, having played this mode myself, it’s more accurately described as a variation of Prop Hunt.

In this mode, players hiding can roam freely within a shrinking area over time while disguising themselves as various objects such as tea cups, chairs, and barrels of wine.

The Prop Hunt game mode originated as a custom mod for Garry’s Mod, a game not marketed toward children and has since been featured in numerous mature-rated games like Call of Duty, which the FTC conveniently ignores. If Genshin Impact‘s version of this mode is considered child-directed, then by that logic, any game featuring Prop Hunt would be under scrutiny, which is clearly not the case.

The FTC also whines about Genshin Impact using influencers for marketing, despite influencer marketing being a standard industry practice. The complaint absurdly suggests that HoYoverse’s collaboration with content creators makes them responsible for attracting minors, even though these influencers are typically adults producing content for an adult audience, not that this distinction has ever stopped regulatory overreach before.

It’s not an influencer’s fault if kids happen to watch their videos or streams just like it’s not a game studio’s responsibility to police who tunes in. Major publishers across the industry including Sony, Microsoft, Ubisoft, EA, and Activision routinely provide review codes and early access to influencers and gaming journalists for coverage. This is standard industry practice, yet the FTC is singling out Genshin Impact as if it’s some predatory anomaly.

Meanwhile, other free-to-play games with similarly aggressive monetization such as Fortnite with its collaborations and V-Bucks have actually violated COPPA, leading to Epic Games being fined a staggering $275 million.

Despite Fortnite sharing the same ESRB rating of T for Teen, it is widely recognized as a game played by children, largely due to its constant commercial tie-ins with kid-friendly franchises like Wreck-It Ralph, NERF, Naruto, Dragon Ball, Spider-Man, and even SpongeBob SquarePants.

The game has also collaborated with influencers, musicians, and athletes like Ninja, Eminem, Ariana Grande, and LeBron James, further blurring the lines between its intended audience and reality.

Yet, the FTC is suspiciously quiet when it comes to Fortnite‘s far more blatant child-oriented marketing but Genshin Impact gets thrown under the “battle bus.”

At the end of the day, the responsibility falls on parents who fail to monitor their children’s online activities not on HoYoverse, influencers, or the general adult gaming audience that Genshin Impact is actually marketed toward.

The purpose of rating boards and age labels is to inform consumers about a game’s content and whether it’s suitable for them or their children. However, ratings aren’t always applied consistently. Genshin Impact, a free-to-play Chinese game that totally doesn’t siphon your data, is rated for teenagers and above, while sports games published by Take-Two and EA are seemingly granted immunity from scrutiny.

Take EA’s FIFA series or 2K’s basketball games, both filled with predatory microtransactions and loot boxes yet they still receive kid-friendly age ratings. Meanwhile, Balatro, a roguelike with gambling mechanics, was slapped with an 18+ rating due to its themes, a logical but strict classification.

But when it comes to sports games, which encourage real-money gambling mechanics for children as young as 3, the ESRB conveniently looks the other way.

Microtransactions in EA and 2K sports games have become critical revenue drivers, generating significant backlash from players due to their aggressive implementation. In games like FIFA (now EA Sports FC), Madden NFL, and NBA Live, loot boxes and in-game currency have been used for years to push microtransactions.

Players are encouraged to purchase packs (like FIFA Ultimate Team Packs or Madden Ultimate Team Packs) containing player cards or items that directly affect gameplay.

These packs can be bought with real money for a chance at unlocking random in-game items, mostly player cards. These cards allow players to create their dream teams and compete in online modes.

The issue arises when high-rated player cards are extremely rare, creating a pay-to-win environment where spending real money on packs boosts the odds of obtaining these powerful players, giving those who can afford to spend more a clear advantage. What’s worse, these games are typically annual releases, making previous titles obsolete the moment a new one drops.

This means any money spent to acquire specific players becomes essentially void as the cycle resets, rendering your investment worthless the second the next game hits the shelves.

2K Games, especially with its NBA 2K series, has faced similar criticism for incorporating microtransactions that impact both player progression and gameplay. The most notorious example is found within the MyCareer and MyTeam modes. In MyCareer, players create a custom character, known as MyPlayer, and participate in career mode.

To level up quickly, players can spend VC (Virtual Currency), which can be earned through gameplay but is far more efficiently acquired through microtransactions. By spending money, players can obtain better equipment and boosted stats, giving them a distinct competitive advantage in online play.

Similar to FIFA’s FUT, NBA 2K’s MyTeam mode lets players collect randomized card packs containing player cards. Spending real money on VC accelerates the process of acquiring better cards, creating a pay-to-win model where players with larger wallets can quickly assemble a stronger team.

In both EA Sports and 2K sports games, the odds for randomized loot (such as player packs or card pulls) are generally not transparently displayed, which has been a major point of contention. While these games heavily rely on randomized packs, they don’t even disclose the chances of getting high-tier items or specific players, unlike Genshin Impact that provides this information.

Another concern is the fact that these sports games are primarily played on home consoles, whereas Genshin Impact is more tailored to mobile audiences and is also accessible on PC. This distinction is important because children often play these games on the same console their parents use, which means they are likely not using a separate account.

Instead, they play while logged into their parents’ accounts. With in-game microtransactions in these games, if parents have already made purchases on Microsoft Store or PlayStation Store, a child can easily buy in-game items through the automated checkout process, thanks to the system being linked to a payment method.

This setup only makes the situation more damaging, as it enables children to make purchases without direct parental oversight.

Instances like this underscore the bias and flaws inherent in current rating boards, which need a complete overhaul to ensure they are applied fairly and evenly. Children should never be involved in activities that engage with legitimate gambling mechanics, whether these mechanics are purely fictional or have real-world consequences like microtransactions.

The responsibility, ultimately, lies with the parents. Too often, parents are negligent, allowing their kids to roam the internet unmonitored and unrestricted. Whether it’s a free-to-play gacha game like Genshin Impact or a sports game supposedly designed for all ages, children are exposed to microtransactions without proper oversight.

What makes this situation particularly frustrating is that companies like EA and 2K, which market their games directly to children, are allowed to get away with far more insidious practices. Games like FIFA and NBA 2K use loot boxes and virtual currencies to push players into spending real money, but without transparently disclosing the odds of obtaining specific, valuable items, creating a pay-to-win environment.

Games like Genshin Impact and similar titles aren’t inherently pay-to-win, unless you believe that reaching the top 1% on monthly leaderboards is something worth striving for. These games can be fully enjoyed and played solo without any financial incentive or pressure.

These practices fly under the radar because they are disguised within the context of sports games, which carry ratings that make them seem appropriate for younger audiences, despite their obvious reliance on gambling mechanics.

On the other hand, Genshin Impact and other prominent gacha games, despite showing clear transparency about drop rates and odds, are being fined for their practices, even though they don’t engage in the same level of deception as their counterparts in the sports gaming industry.

The issue here isn’t the games themselves, it’s the lack of consistency in how companies are held accountable. Other games are directly marketed to children, with in-game purchases and randomized loot boxes that have no disclosed odds, yet Genshin Impact are the ones being penalized with fines, likely due to their prolific profit and Chinese origins while others continue unchecked which honestly begs to question whether the moral busybodies at the FTC seemingly were disgruntled over the fact that they didn’t get the character they want with pity?