Genshin Impact Creator Fined $20M by US FTC for Gacha System Violations

Cognosphere, recognized in the gaming world as Hoyoverse, is in the process of resolving a lawsuit with the United States Federal Trade Commission (FTC) linked to the sale of loot boxes in Genshin Impact to players younger than 16 years old. The agreement involves a hefty $20 million fine, as the company was accused of breaching U.S. child privacy laws and misleading young users about the actual costs involved in-game transactions and the chances of winning rare items. Furthermore, they’ve agreed to stop selling loot boxes to anyone under 16 unless there is parental consent. The complaint not only highlights the issue of selling to minors but also points out alleged mishandling of kids’ data.

Samuel Levine, director of the FTC’s consumer protection bureau, emphasized, “Genshin Impact misled kids and teens into spending large sums of money on prizes with slim winning chances.” He further noted, “Companies using such deceptive tactics will face consequences, especially when they mislead young players about in-game purchase costs.”

Awaiting judicial approval, this settlement is more than just a fine. Here’s what it involves, according to the FTC release:

A spokesperson for Genshin Impact shared with Polygon, expressing, “Anime-style games attract players of all ages globally. Genshin Impact, while free-to-play, is tailored for older teens and adults. Although we dispute many of the FTC’s claims, we’ve agreed to this settlement because we prioritize our community’s trust and transparency. In compliance, we will implement new age-verification and parental consent measures, and enhance clarity on virtual currency and rewards for U.S. players.”

Bloomberg previously hinted that players who splurged on loot boxes might receive compensation, but the FTC clarified to Polygon that the $20 million penalty will be directed to the U.S. Treasury, as required by law.

Genshin Impact utilizes a “gacha” model, enticing players to swap real money for in-game currency used to make “wishes”—essentially chances to unlock characters or weapons. This setup often leads to significant spending in pursuit of rare items, a practice some liken to gambling. The FTC pointed out that this system involves multiple currencies, obscuring actual spending on loot boxes.

Further, the FTC accused Hoyoverse of heavily marketing this gacha system, spending millions annually targeting players, many of whom are minors. They highlighted a case from 2021, where prominent influencer SSSniperWolf was paid over $100,000 to create videos about Genshin Impact, prominently featuring loot box openings.

The FTC pointed out an instance in May 2021, detailing a video segment where SSSniperWolf opened twelve loot boxes sequentially—exhibiting excitement as scripted and seemingly securing a rare 5-star character. Her comment, “We are getting way too lucky tonight… the RNG [random number generator] really did us good,” suggested an unusually fortunate outcome.

The FTC claims this video was manipulated to show a false loot box win, alleging such a scenario wouldn’t be possible in Genshin Impact. Their evidence highlighted discrepancies like SSSniperWolf opening 12 boxes consecutively when the game permits just 10, alongside incorrect animations for 5-star prize openings.

Note: The article has been updated to include Hoyoverse’s statement and detailed settlement information.