The Federal Trade Commission (FTC) has announced a $20 million settlement with Cognosphere, the Singapore-based developer of the popular game Genshin Impact, over deceptive practices related to loot boxes. The settlement comes after an investigation found that the company had actively marketed loot boxes to children and misled players about their odds of winning prizes.

According to the FTC, Cognosphere's loot box system was designed to deceive players, particularly children, about the real costs of in-game transactions. The company required players to buy virtual money, which involved multiple currency exchanges, leading to players spending hundreds of dollars on prizes they stood little chance of winning. This practice has been likened to a form of legal gambling, sparking concerns among regulators and parents.

The complaint filed by the Department of Justice also accuses Cognosphere of collecting personal information from children under 13 without parental consent, violating the Children's Online Privacy Protection Rule. The company allegedly used social media channels and in-game banners to target children, further exacerbating the issue.

As part of the settlement, Cognosphere is required to delete any data collected from children under 13 whose parents haven't consented to their data being collected. The company must also offer an option to buy loot boxes directly, rather than only through virtual money, and disclose exchange rates for multi-tiered virtual currency. Furthermore, Cognosphere is forbidden from misrepresenting pricing, features, and winning odds for loot boxes.

This settlement marks a significant milestone in the ongoing debate over loot boxes and their potential impact on children. The FTC's action sends a clear message to game developers that deceptive practices will not be tolerated, and that protecting children's privacy and safety is a top priority.

The implications of this settlement extend beyond Cognosphere, as it sets a precedent for the gaming industry as a whole. Game developers must now re-examine their loot box systems and ensure they are transparent, fair, and compliant with regulations. The FTC's action is a step towards creating a safer and more responsible gaming environment for all players.

In the wake of this settlement, gamers and parents alike will be watching closely to see how the industry responds. As the debate over loot boxes continues, one thing is clear: the days of deceptive practices and exploitation of children are numbered.