The U.S. Government's Lawsuit Against Genshin Impact's Publishers: Explained

The U.S.-based COGNOSPHERE LLC and Singapore-based COGNOSPHERE PTE. LTD., jointly operating under the HoYoverse name and providing the Genshin Impact game to U.S. customers, have agreed to pay $20 million in financial penalties following a legal complaint advised by the FTC and filed by the United States government’s Consumer Protection Service.

It’s worth noting that while HoYoverse says many of the FTC’s allegations are inaccurate, it has accepted the agreement “because we value the trust of our community and share a commitment to transparency for our players.” References to HoYoverse’s acceptance below refer to the legal complaint rather than any public admission of guilt.

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The agreement was negotiated in private and relates to violations of the Children’s Online Privacy Protection (COPPA) Rule and the FTC Act, where HoYoverse accepted — with the knowledge that children used its services — that it failed to make the information it collected on children clearly available and failed to notify parents or get consent on the data collected and its use.

Furthermore, by accepting the complaint, HoYoverse accepts that it misrepresented the odds of getting particular characters from loot boxes (Wishes) and the true financial cost of acquiring particular characters. It did this through unclear wording and multiple currency tiers. For example, one way to acquire a desirable character through a Wish is by converting real dollars ($) to Genesis Crystals to Primogems to Wish tokens to Wishes. The U.S. government said this obscured “the amount that these consumers spend within the game, as well as the substantial expenditure generally required to obtain rare loot prizes.”

By accepting the complaint, HoYoverse agreed that the findings in this complaint could be used as a basis for future civil cases by and on behalf of the FTC. These include mishandling of child information and unfair business practices regarding loot boxes. This may weaken HoYoverse’s legal position in potential future cases. Nevertheless, this does not constitute an admission of guilt.

The complaint was filed at the U.S. Central District Court of California. The FTC advised the filing of the complaint. Its stipulations (aimed at players in the U.S.) will go into effect after having been signed off by district judge Mark C. Scarsi.

HoYoverse Accepts Major Changes Aimed at Genshin Impact Players in the U.S.

In addition to the $20 million settlement (a fraction of the revealed $4 billion that Genshin Impact has grossed in the U.S. alone [Page 7]), one of the biggest outcomes is that Genshin Impact will implement an age gate.

Children under 16 must gain parental consent to spend money in the game; parents will receive detailed information regarding the nature of Genshin Impact‘s gacha system and an understanding of the true (and very low) likelihood of obtaining special characters and items. Players under 13 must gain parental consent to have their data used otherwise their details will be deleted.

All Players will receive increased transparency regarding loot box likelihoods. For the first time, the range of potential total cost in fiat currency (e.g. dollars) to acquire digital assets (e.g. featured Genshin Impact characters on Event Banners) will be clearly displayed. Given the profitability of gacha games heavily depends on obscuring the cost of pulling desired characters and a sizeable youth market, the stipulations (shown below) are incredibly significant for HoYoverse.

HoYoverse’s Pending Changes to Genshin Impact — a Detailed Breakdown

For clarity, the U.S. government’s legal complaint frequently references a “Covered Mechanism,” which will be loosely defined here as a chance-based mechanism to acquire digital content, commonly known as a gacha system. Since HoYoverse has accepted the legal complaint, it means within 6 months after the Effective Date (January 21, 2025), HoYoverse and all other notified parties are:

• Banned from advertising or offering the sale of any digital asset, such as “Loot boxes” or “Wishes,” in Genshin Impact to children under 16 without obtaining explicit parental consent. This disclosure to parents must clearly outline the nature of Genshin Impact to parents, and explain the process, likelihood, and potential cost of acquiring digital assets, such as characters featured in Genshin Event Banners.
  
• Forced to offer the chance/opportunity of acquiring digital content (e.g. a Wish token) through fiat currency purchase options (e.g. dollars) alongside its existing multi-tiered virtual currency. You will be able to buy a Wish token directly with your money.

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• Banned from misrepresenting: the outcomes offered by the gacha system (e.g. which characters are available), the likelihood of obtaining a digital asset during and outside of a promotional offering or sale, the potential cost range (in U.S. dollars or other currency) of acquiring a digital asset assuming a user only uses fiat currency to do this, and the nature of the gacha system itself.
  
• Forced to clearly and conspicuously disclose the likelihood of obtaining prominently featured digital content: at the point of sale via the gacha system, and when otherwise promoting digital content accessible by a gacha system (e.g. on Event Banners). This disclosure must be made in close proximity to said content.
  
• Forced to clearly and conspicuously display the potential total cost in fiat currency of acquiring digital content via the gacha system assuming a user only uses fiat currency.
  
• Forced to clearly and conspicuously display how many transactions (gacha pulls) buying a bundle or package of virtual currency entitles one to.
  • Furthermore, irrespective of how HoYoverse bundles its virtual currency, it must clearly indicate how much it would cost for a single gacha pull/Wish in dollars by purchasing this bundle.
    
• Forced to make easily accessible (on their websites and login screen) an online notice explaining every featured digital asset a consumer can acquire through its current gacha systems, the probability of obtaining that asset, and the range of potential costs in fiat currency assuming a user only uses fiat currency to acquire featured in-game items via the gacha system.

U.S. Government Uses Paimon as Evidence That Genshin Impact Is a Game Directed to Children

The U.S. government’s allegation that Genshin Impact is a service “directed to children” was a major part of its legal complaint. This doesn’t necessarily mean it’s a game for kids, but rather that it appeals to and has been marketed to children. Its reasoning included the lack of blood and gore, “anime-style cartoon graphics and colorful animation,” the “child-like non-playable character” Paimon, and the use of paid influencers who appeal to children and frequently play other child-oriented games, like Minecraft and Roblox. In accepting the U.S. government’s legal complaint, HoYoverse, as an operator of an online service directed to children, and relevant associated parties, are:

• Forced to post a prominent and clearly labeled link concerning its practices on collecting data on children on the home/landing page/screen of its services and at each area where this information is collected.
  
• Forced to make reasonable efforts to notify parents of its operations and obtain parental consent regarding the collection, use, disclosure, and changes in collection methods of children’s personal information to which a parent has previously consented.
  
• Forced to obey the Children’s Online Privacy Protection (COPPA) Rule. The FTC summarizes the COPPA Rule as imposing “certain requirements on operators of websites or online services directed to children under 13 years of age, and on operators of other websites or online services that have actual knowledge that they are collecting personal information online from a child under 13 years of age.” More details are here.
  

HoYoverse Must Implement an Age Gate for Genshin Impact Players in the U.S.

Within 120 days of the Effective Date, HoYoverse and its “officers, agents, employees, and attorneys, and all other Persons in active concert or participation with any of them, who receive actual notice of this Order, in connection with being an Operator of the video game Genshin Impact and HoYoLAB website” are:

• Forced to implement a neutral age gate for Genshin Impact. A neutral age gate simply prompts users to fill out their age without any preset birthday.
• Forced to delete all information associated with any user unless they provide information that they’re 13 or older, or have had their parents directly notified and received parental consent in turn.

After 180 days of the Effective Date (defined as the Account Suspension Date), the aforementioned parties are:

• Forced to notify the users that their accounts will be deleted if they do not confirm their age and must refrain from collecting, disclosing, or using personal information from that account except to identify that account.
  • If the age is still not identified within one year of the Account Suspension Date, HoYoverse and related parties will delete all personal information. HoYoverse will need to provide a report a month after that to the FTC describing its processes regarding its age collection.

Source: United States v. Cognosphere, LLC (2:25-cv-00447) (Court Listener), FTC
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