Genshin Impact developer fined and banned from selling in-game items to children without parental consent

Genshin Impact developer HoYoverse has been fined $20 million by the US Federal Trade Commission for "selling lootboxes to teens under 16 without parental consent." The Federal Trade Commission (or the FTC) is a government-owned organization in the United States that works to ensure fair business practices and consumer protection in the country.

According to a complaint lodged by the United States Department of Justice (based on a referral from the FTC), Cognosphere Pte. Ltd (aka HoYoverse) has been accused of unfair trade practices, which include "unfairly marketing lootboxes to children" and "deceiving players about the odds of winning these lootbox prizes."

Apart from a $20 million fine, HoYoverse will also be required to "block children under 16 from making in-game purchases without parental consent."

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FTC fines HoYoverse $20 million, Genshin Impact developer responds

The FTC, in conjunction with the United States Department of Justice, has filed a complaint against Genshin Impact developer HoYoverse (also known as Cognosphere Pte Ltd. in America) for "unfair business practices related to loot box transactions in Genshin Impact."

These practices violate certain sections of the Federal Trade Commission Act, as well as the Children’s Online Privacy Protection Act of 1998 (COPPA).

According to the complaint, the game's developer has reportedly misled players — especially children and younger teenagers — into spending thousands of dollars on "lootboxes."

While Genshin Impact technically doesn't have lootboxes, in this case, the gacha system (for obtaining 5-star characters in-game) has been categorized as a lootbox mechanism by the FTC.

The complaint states:

"Within the game and in marketing materials, HoYoverse classifies heroes as having rarities of either “4 stars” or “5 stars,” with 5-star heroes being far more powerful and desirable for players to collect. HoYoverse does not make these heroes available directly for purchase, and so the only way that players can obtain them is by opening loot boxes. As a result, the core gameplay creates pressure on players to open loot boxes to advance in the game, and, frequently, to spend real money to do so."

Furthermore, the FTC has also accused HoYoverse of misleading players into spending money to obtain the featured 5-star character on an event banner:

"Consumers are also misled by HoYoverse’s “guarantee" to win 5-star character at least once per 90 attempts” because they are led to believe that it applies to the 5-star character prominently featured in the Event Banner."

Even though Genshin Impact's in-game character/weapon banners clearly specify the drop rates for the featured characters, the complaint states that "children and teenagers are less likely than adults to understand what they are spending or the real costs of desired digital items".

HoYoverse has responded to the FTC complaint (Image via HoYoverse)

In response to the FTC's complaint, HoYoverse has issued a statement announcing that they have agreed to settle the case with a $20 million fine, even though they "believe many of the FTC's allegations are inaccurate."

Additionally, the developer has announced that a new system will be implemented in Genshin Impact in the upcoming months, which will introduce "age-gate and parental consent protections for children and young teens." These modifications will only be applicable to players in the United States of America.

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