Singaporean video game distributor Cognosphere has been slapped with a US$20 million (A$32 million) fine to settle a claim with the US Federal Trade Commission (FTC).
The fine relates to the popular Chinese game Genshin Impact, which is distributed by Cognosphere. In the US Cognosphere trades under the name HoYoverse.
The FTC said the game violated the privacy of children and duped players over the costs associated with winning prizes.
“Genshin Impact is popular among children and teenagers, some of whom have spent hundreds or thousands of dollars to obtain select chance-based prizes in the game, to their parents’ surprise.
“The game features anime-style cartoon graphics, bright and colourful animation, and several heroes who have the speech or appearance of children. Defendants have extensively promoted the game, including to children, through advertisements, social media channels, and paid ‘influencers’.”
The FTC said Cognosphere knew that some users were aged under 13, but “proceeded to collect personal information from children before (and without ever) notifying parents and obtaining parental consent”.
Genshin Impact, which can be downloaded and played for free, makes money primarily by selling virtual currency within the game that consumers can spend on chances to obtain a prize based on luck, the FTC said.

Genshin Impact.
“Mystery prizes of this kind that are awarded based on luck, and revealed only after the consumer has paid to open them, are known as ‘loot boxes’. Defendants widely advertise, and prominently feature within Genshin Impact, select ‘5-star’ prizes, which consumers can obtain only by opening loot boxes.”
The FTC said the odds of a loot box containing the advertised prize “are very low, and consumers commonly must purchase dozens of loot boxes, at the cost of hundreds of dollars, to obtain a single 5-star prize”.
Yet, it claimed, Cognosphere “misrepresented players’ odds of obtaining rare loot box prizes, and Defendants have misled players about the substantial expenditure likely required to obtain these prizes”.
In a statement published on its website Cognosphere said it had “reached a settlement agreement with the United States Federal Trade Commission to strengthen and increase transparency around our parental consent and virtual currency practices”.
“Animation-style games and shows are well-received by global audiences and players across various ages. Genshin Impact is a popular free-to-play, anime-style game designed for older teens and adults. While we believe many of the FTC’s allegations are inaccurate, we agreed to this settlement because we value the trust of our community and share a commitment to transparency for our players.
“Under the agreement, we will introduce new age-gate and parental consent protections for children and young teens and increase our in-game disclosures around virtual currency and rewards for players in the U.S. in the coming months.”
The company didn’t specify the allegations it claimed were inaccurate, nor did it explain why they were inaccurate.
Genshin Impact has generated more than US$6 billion (A$9.7 billion) in revenue since debuting five years ago.