YOON&YANG

The landscape of gaming regulation is undergoing significant changes both in Korea and abroad. In a landmark development, Korea will introduce enhanced legal protections for consumers in probability-based game item disputes starting August 2025. These protections include treble damages and a reversed burden of proof in civil litigation relating to probability-based game items. While probability disclosure requirements have been mandatory under the Game Industry Promotion Act (the “GIPA”) since March 2024, these additional consumer safeguards were secured through a partial amendment to the GIPA (the “Amendment”) passed by the National Assembly in December 2024 and approved by the cabinet on January 21, 2025.

This regulatory shift in Korea coincides with heightened scrutiny of probability-based game practices globally. In a notable case, Genshin Impact's developer reached a $20 million settlement with the U.S. Federal Trade Commission (“US FTC”) to resolve allegations of children's privacy violations and misleading marketing practices regarding probability-based items.

These developments signal a transformative period for the Korean gaming industry, as regulatory frameworks evolve to address consumer protection concerns in both domestic and international markets.

1. Background

2. Enhanced Legal Framework for Probability-Based Game Items in Korea

3. Global Precedent: Genshin Impact's $20M US FTC Settlement

4. Strategic Implications for Gaming Companies

1. Background

The Korean gaming industry faces significant regulatory changes as the Ministry of Culture, Sports, and Tourism (“MCST”) implements new special legal provisions for probability-based game items. The Amendment, which was passed by the National Assembly on December 31, 2024 and approved by the Cabinet on January 21, 2025, strengthens consumer protections by addressing the challenges in proving and remedying violations of probability disclosure requirements. These provisions build upon the mandatory probability disclosure system implemented in March 2024, recognizing the dispersed and collective nature of damages in such cases.

In parallel developments, the global gaming industry witnessed a landmark case as Genshin Impact's developer agreed to a $20 million settlement with the US FTC. The settlement addresses allegations of privacy violations concerning children and deceptive marketing practices related to probability-based items.

2. Enhanced Legal Framework for Probability-Based Game Items in Korea

Article 33-2 of the GIPA, newly established in the Amendment, introduces key legal provisions strengthening consumer protection in probability-based gaming disputes:

• Reversed Burden of Proof: Game operators must demonstrate absence of intent or negligence to avoid liability

• Simplified Damage Claims: Courts are empowered to determine damages through holistic review considering all available evidence and circumstances when precise damage calculation proves challenging

• Enhanced Penalties: Treble damages for intentional violations of disclosure requirements

• Institutional Support: MCST to establish dedicated game dispute resolution center centralizing reporting and remediation processes for user complaints

This framework significantly strengthens consumer protection while establishing clear procedural guidelines for dispute resolution.

3. Global Precedent: Genshin Impact's $20M US FTC Settlement

A. Market Context

While some jurisdictions like Belgium have banned probability-based items entirely, the U.S. regulatory approach has focused on consumer protection and transparency. The Genshin Impact settlement, reached between Cognosphere (HoYoverse's global service subsidiary) and the US FTC in California Federal Court, marks a significant precedent in U.S. gaming regulation.

B. Settlement Requirements

The settlement agreement mandates:

• Age verification for probability-based purchases (parental consent required under 16)

• Direct purchase options using real currency as an alternative to virtual currency

• Accurate representation of probability rates, pricing, and functionality

• Transparent disclosure of probability and currency exchange rates

• Deletion of under-13 user data collected without parental consent

• Full COPPA compliance regarding notice and consent

C. Regulatory Violations

The US FTC investigation revealed multiple infractions beyond COPPA violations:

• Misrepresentation of item probability rates

• Deceptive pricing practices for rewards

• Exploitative virtual currency systems targeting minors

• Improper marketing of probability-based items to underage users

4. Strategic Implications for Gaming Companies

A. Preparing for Special Legal Provisions for Litigation: Strategic Considerations

The global regulatory landscape for probability-based items is evolving, with Korea taking a leading position through its enhanced legal framework. The implementation of special legal provisions for litigation concerning probability-based game items presents immediate challenges, particularly regarding the reversed burden of proof. Companies must now conclusively demonstrate absence of intent or negligence in violations—a standard requiring robust documentation of operational processes.

Risk mitigation hinges on comprehensive preparation. Companies should establish and maintain detailed records covering their entire probability-based item ecosystem, from conceptualization through implementation and adjustments. Based on recent Korea Fair Trade Commission (KFTC) proceedings, successful defenses have centered on documented planning procedures and systematic decision-making frameworks. Companies should prioritize:

• Implementing systematic documentation protocols

• Establishing clear decision-making hierarchies

• Conducting regular compliance audits

B. US Regulatory Landscape: Lessons from Genshin Impact

Korea has established a mature regulatory environment for probability-based gaming items through comprehensive legislation, setting it apart from the U.S.'s emerging approach. Korean laws—including the GIPA, Personal Information Protection Act, and E-commerce laws—already address the concerns highlighted in the recent US FTC actions regarding COPPA and FTC Act compliance. While "intuitive" probability disclosure requirements may be subject to interpretation, adherence to Korean regulatory standards generally ensures robust compliance.

That said, the key significance of the Genshin Impact case lies in its clarification of the US market entry requirements:

• Age-restricted access to probability-based purchases (under-16)

• Direct currency purchase options

• Transparent probability and pricing disclosures

• Enhanced data protection for users under 13

Companies must also exercise particular vigilance regarding violations highlighted by the US FTC, including misrepresentation of item probabilities, false statements about reward costs, and unfair marketing of multi-layered virtual currency systems targeting minors.

Yoon & Yang Game Center combines deep industry expertise with regulatory insight to provide strategic guidance on gaming industry legal matters. For assistance navigating these requirements, please contact our team.