Roblox: A Toxic Playground for Children and Young People That's Costing Investors

Roblox, a popular online gaming platform, is under scrutiny for its failure to adequately protect children from harmful content and interactions and falsifying user numbers which has resulted in huge loses for investors. Investors are learning that to protect their investments, platforms must prioritise child safety to remain profitable and ensure a return on investment.

On October 8, 2024 a report by Hindenburg Research, Inflated Key Metrics For Wall Street And A Pedophile Hellscape For Kids corroborated the findings of a Bloomberg report released in July 2024, highlighted once again, a disturbing reality: Roblox has become a breeding ground for sexual predation, harassment, and exposure to graphic violence. Shares of Roblox fell on October 8, 2024, following the report, which alleged the company inflated its user metrics, overstated its Daily Active Users, and prioritised user growth over child safety.

Block & Leviton is investigating Roblox Corp (NYSE: RBLX) for potential securities law violations and is inviting Investors who have lost money in their Roblox Corp investment to get in contact.

Hindenburg Research and Bloomberg Report Highlight Roblox's Child Safety Problem.

Both Hindenburg Research and the Bloomberg report titled Roblox’s Paedophile Problem highlighted the serious risks facing children on Roblox. Both reports revealed that despite Roblox's claims of prioritising child safety, its inadequate moderation efforts and focus on user growth have allowed predatory behaviour to thrive.

Key Findings

• Sexual Predation and in-game currency: Roblox has become a hub for sexual predators targeting children. The Hindenburg Research found members of online groups were openly trading child sexual abuse materials and soliciting sexually explicit content from children. To understand what is involved in solicitation, in 2019, an aspiring barrister, Owian Thomas groomed 150 children to engage in sexual activity using online game Roblox. For example, he paid a 10-year-old victim 400 Robux (Roblox's in-game currency) equivalent to $4.90 to perform a sexual act while he watched him on a webcam.
• Harmful Content: Both reports found that Roblox is filled with games that promote violence, hate speech, and sexually suggestive themes.
• Inadequate Moderation: Roblox's moderation efforts are outsourced to overwhelmed and underpaid call centres leading to ineffective enforcement and a lack of accountability
• False economy - Prioritisation of Profits Over Safety: The company's focus on user growth and revenue has taken precedence over child safety, resulting in a decline in moderation effectiveness. Roblox’s chief safety officer, Matt Kaufman, calls safety and civility “foundational” to the company and claims that most children have a great time on Roblox. This is reminiscent of the concept that you have to break a few eggs to make an omelet. In this case, the eggs represent the safety and well-being of children. Roblox's focus on civility is a red flag. While civility is important, it's a superficial concern compared to the real harms happening on the platform. Roblox's failure to take proper measures to keep children safe online demonstrates a lack of commitment to their safety and well-being, which has resulted in harms to children and young people, investors and Roblox’s bottom line.

Legal Obligations: Age Checking and Digital Parenting

Roblox has a legal obligation to verify the ages of its users and obtain parental consent from the person with parental responsibility for a child under 13, which is a signifiant portion of its user base. Roblox is also not compliant with regulations that require companies to exercise a duty of care toward children, respect their rights to participate in a safe online environment and protect children from exploitation. By deploying age assurance and digital parenting services, Roblox could reliably know the ages of its users and enable the person(s) with parental responsibility for a child, to have greater transparency of in-game currency transactions, which can be linked to sexual exploitation and bullying.

Roblox could take crucial steps to prevent adult strangers from soliciting children to engage in sex acts in exchange for Robux and implement age-based restrictions on content and features.

• Digital Parenting: It enables parents to actively monitor their child's online activities and provide guidance.
• Accountability: The Digital Services Act allows parents to seek out-of-court dispute resolution if their child is exposed to harmful content. Parents can hold companies accountable for harms to their child's safety and well-being.

Tech Standards Exist: Regulators Must Act

International tech standards for age assurance and verifying parental responsibility for a child already exist. Regulators must take action to ensure their codes of practice stipulate that companies implementing age assurance and parental consent services in alignment with these standards. Roblox and other gaming and social media platforms are required to implement age assurance, enable digital parenting and greater transparency on in-game currency transactions. Enforcement by regulators will help to address Roblox's non-compliance and the harmful consequences it has on children.

 Inadequate due diligence or complicity in 'group think' by advertising companies?

On the day the Hindenburg Research report was released WPP, a multinational communications and advertising giant, announced a partnership with Roblox. Advertising companies like WPP should conduct due diligence before forming partnerships with platforms that researchers conclude pose a significant risk to child safety. WPP's partnership with Roblox raises concerns about its potential complicity in the belief that companies can cut child safety measures while generating the vast majority of its revenue from children.

Roblox serves as a stark example of the fallacy of this belief. The company's failure to prioritise child safety has led to significant losses, demonstrating that prioritising profits over child protection is a short-sighted and ultimately harmful strategy.

According to Truth in Advertising.org, consumer complaints about Roblox filed with the FTC cite children as young as four years old. This highlights the significant risk Roblox poses to even the youngest users. Moreover, many parents feel misled by Roblox's advertising, which often portrays the platform as child-safe. The reality is far different, as evidenced by the numerous complaints of harmful content and predatory behaviour.

Investors, Shareholders, and Advertisers: Do the Maths! Prioritise Child Safety for Long-Term Profitability

In 2023, the annual revenue of Roblox Corporation amounted to 2.8 billion U.S. dollars. Roblox generates almost all its revenue through the sales of virtual currency, Robux, which players can use to purchase virtual items sold by the Roblox developer and creator community on the platform. Investors, shareholders, and advertisers should take a hard look at Roblox's commitment to child safety, because the company's revenue stream, primarily fuelled by children and young people purchasing Robux, is at significant risk due to its failure to prioritise child protection.

Hindenburg Research and the Bloomberg Report can severely damage consumer confidence, particularly among parents.  To protect their investments, investors must understand that Roblox and similar platforms must prioritise child safety to remain profitable and ensure a return on investment. Investors should hold platforms accountable and make it a requirement of securing investment that platforms prioritise child protection, to ensure the company's continued growth and profitability.

Lessons for investors – False trade-off’s cost you money

Among certain investors, for example, Marc Andreessen's view on reactionary futurism and compliance often emphasises the importance of unhindered technological progress and a skepticism of regulations that may impede innovation. However, the Roblox investigation demonstrates the myopic nature of this investor mindset. Companies that prioritise profits over child safety and operate with a bare minimum compliance stance are at significant risk of financial loss. The Roblox case illustrates the importance of adhering to regulations and prioritising child protection for long-term profitability. By neglecting these crucial aspects, companies not only harm children but also jeopardise their own financial success and that of their investors.

Investors must recognise the importance of responsible corporate behaviour and support companies that prioritise both innovation and ethical practices. Investors in Roblox and in general, should conduct due diligence to ensure that companies prioritise child safety and operate in compliance with regulations. Shareholders should mandate that companies focus on protecting their users, in order to maximise profits. Investors should be aware that companies that operate in non-compliance or with 'bare minimum' compliance, abdicating their duty of care towards children and young people and making a false trade-off between profits over safety of these young users, are at significant risk of financial loss.

Conclusion

Roblox and other gaming platforms must take immediate action to address the serious problems plaguing these platform. This includes deploying age and parental responsibility verification, strengthening moderation efforts, implementing stricter content filters, investing in technology to detect and prevent harmful interactions, complying with legal obligations, and prioritising child safety over user growth.

By taking these steps, Roblox can create a safer and more positive environment for its young users.

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