How Roblox lost $12 Billion due to major child safety issues, and how your game can avoid it

In 2025, over 11 days from August 10, 2025, to August 21, 2025, Roblox lost $12.7 billion in market value. The drop was a result of years of systemic failures to protect children from predators.

Roblox is a massive multiplayer game ecosystem and set of game tools that allows players to build and generate their own worlds and mini-games. Roblox Corporation, the creators of the Roblox ecosystem, was founded in 2004, and the first version of Roblox was released in 2006. As of 2024, Roblox had 380 million monthly active users, with over 111 million daily active users. The number of peak concurrent users reached around 32 million in 2024. Roblox generated $3.6 billion in revenue in 2024, a 29% year-over-year growth. This, in turn, led the company’s market cap to reach $38-$39 billion USD (as of 2024).

With that kind of massive growth and community, Roblox has faced multiple challenges, primarily around child safety. This article is a brief history of the child safety issues Roblox has faced over the years and how you can protect your F2P multiplayer game from them.

Pre-2015: The calm before the storm

Roblox wasn’t as big as it is now, and conversations around child safety were scarce in online forums. Parents raised concerns about inappropriate chat, stranger interactions as well disturbing content, but Roblox had not yet caught regulators’ eyes.

2016 - 2017: Sporadic complaints arise

As of 2016 there were occasional user complaints about “condo games” (sexual games) and general grooming behavior in chat, but these were mostly isolated to YouTube channels and Reddit threads rather than covered by the media. Roblox, at the time had rudimentary moderation systems and no robust public reports at the time.

In 2017, there were early signs of “condo games”, and word started spreading around in private Roblox forums and Discord communities about how to bypass filters to create sexual content. These were the precursors to the major “condo game” surge that garnered mainstream media attention in 2020.

May 2018: UAE Bans Roblox Over Child Safety Concerns

The United Arab Emirates pwas the first country to ban Roblox](https://www.thenationalnews.com/lifestyle/2025/08/27/is-roblox-safe-as-gulf-countries-ban-platform/). This came after the UAE Attorney General’s Office flagged “worries about inappropriate content and its effects on children”. The ban emphasized that the platform exposed kids to predatory behavior and obscene content. Neighboring countries like Oman and Jordan equally imposed similar restrictions by 2020 for the same reasons.

Roblox worked with Middle East regulators to address concerns, and by 2021, the UAE ban was lifted after the company presumably enhanced regional content moderation.

July 2018: Roblox Hack Incident

In July 2018, a mother reported that her 7-year-old daughter’s Roblox avatar was “violently gang-raped” by other player avatars in a user-created game. This happened because a hacker had subverted Roblox’s filters, allowing them to inject custom animations depicting sexual assault on a playground. The child is said to have witnessed the graphic acts on-screen before her mother intervened.

Roblox issued a public apology, stating that it had “zero tolerance” for such behavior and that it had taken immediate action. The offender was permanently banned, and the compromised server was shut down. All games that were vulnerable to the same exploit were also removed or required to update to Roblox’s newer, more secure system. The Roblox team put new safeguards in place to prevent this specific hack from recurring. They also personally reached out to the affected family and involved the mother in awareness efforts about parental controls.

This incident marked Roblox’s first major child safety PR crisis. Although at the time, Roblox was still a private company and thus there was no stock impact, it received regulatory and parent scrutiny. At the time, Roblox was in the middle of a significant funding round, which prompted questions about whether kids should be allowed on such platforms. The story also revealed the cat-and-mouse nature of moderation, where moderators work tirelessly to beat predators and vice versa.

Situations like this are why free-to-play games should invest in dedicated moderation tools early on, before things snowball into chaos. If you are looking for an extensive suite of moderation tools for your game, that you can start risk free, then look no further than PlaySafe, which not only allows you to moderate your game’s voice chat, a major culprit in spreading toxicity in social games, it also offers tools to help you manage your communities and gather feedback from players.

August 2019: Extremist & Violent Content Surfaces

As Roblox’s playerbase grew, reporters discovered extremist content appearing on the platform. In August 2019, In August 2019, NBC News highlighted that hate groups and Nazi role-play scenarios were “creeping into Roblox”.

This trend continued into 2020-2021, and the Verge reported that some Roblox content creators would recreate mass shootings such as the Columbine and Christchurch massacres. Roblox stepped up by adding automated keyword and toxic image detection, and also relied on player reports to identify bad actors.

In such situations, AI content recognition can be highly effective, and a tool like PlaySafe can automatically detect inappropriate content and references, flagging or deleting them before they cause harm to your game.

August 2020: “Condo Games” Exposed (Sexual User-Generated Content)

In 2020, an investigative piece by Fast Company and a CBS news segment shed light on a subculture of Roblox called “condo games”. These are user-created games that intentionally bypass Roblox’s filters to depict naked avatars, simulated sex acts, and foul language. These incidents demonstrated that sexual content was a persistent threat in online social multiplayer games such as Roblox.

The entire set of “condo games” incidents was a major reputational blow for Roblox. Roblox, which was by now a massive company with at least half of American kids playing it, faced the wrath of parents who were wondering how such vile content could exist on a kids’ app.

November 2020: First Regulatory Warnings in the U.S

U.S regulators & watchdog groups started formally scrutinizing Roblox in late 2020. The Federal Trade Commission (FTC) received a complaint in April 2022 from Truth in Advertising, alleging that Roblox was tricking kids with undisclosed ads and branded content inside their games. While the complaint was about advertising, it tied into child-safety best practices (protecting children from unsolicited and age-inappropriate marketing).

Roblox responded to the FTC complaint by updating its ad policy to disable all ads for players under 13 by March 2023. Their messaging at this time heavily emphasized child safety, and the company cited ongoing improvements, including hiring safety experts and publishing transparency reports. These incremental changes demonstrated that Roblox was attempting to get ahead of regulatory concerns.

By the time Roblox went public in March 2021, potential regulatory action was a known risk. While the stock's performance was strong early on, investor sentiment began to shift by 2022 as safety concerns mounted.

The best way to avoid regulator scrutiny is pro-active self-policing. Tools like PlaySafe can help companies demonstrate they are going above and beyond to keep kids safe.

June 2021: Lawsuits & Media Spotlight on Child Developer Exploitation

In 2021, Roblox faced criticism for allegedly exploiting the children that build games on the platform. An investigative YouTube video by People Make Games went viral, accusing Roblox of encouraging kids to make games with promises of getting rich, while taking a huge cut of revenue and leaving most creators empty handed.

October 2024: HindenBerg Short-Seller Report Triggers Stock Plunge

On October 8th, 2024, prominent short-seller Hindenburg Research released a report titled “Roblox: Inflated Key Metrics For Wall Street, And A Pedophile Hellscape For Kids.”. The report accused Roblox of misleading investors about its player numbers (claiming that 25-40% of accounts were either bots or alts) and the company willingly downplayed child safety issues. As a result of this, Roblox’s share price fell by as much as 9.4%, wiping out roughly $2-$3 billion in market cap in a single day.

Externally, Roblox’s executives tried to calm investors down in the following earnings calls, emphasizing dozens of safety improvements made in 2024 and plans to invest more in moderation.

April 2025: “Deeply Disturbing” Research on Roblox

In April 2025, a UK-based research firm, Revealing Reality published an in-depth study on the child experience in Roblox. Researchers created test accounts as children aged 5,9 and 10 and documented what they encountered. They found that despite Roblox’s parental controls, young children could easily chat with adult strangers and wander off into sexually charged spaces.

Roblox acknowledged that children may still be exposed to bad actors and that they were “working hard to fix it” but they needed government and industry support to pull it off.

August 2025: Roblox Sues Predator Catchers, Louisiana Attorney General Sues Roblox, Backlash Ensues

In August 2025, Roblox took an aggressive legal stance against some community members that were trying to catch predators. One high-profile target was a YouTuber known as “Schlep”, who conducted an operation where he posed as a minor in Roblox, exposing child predators (leading to multiple real-world arrests). Instead of thanking him, Roblox’s legal team sent Schlep a cease and desist later and IP-banned all his accounts, alleging that his actions violated the terms of service of Roblox and “created an unsafe environment”.

Many saw Schlep’s actions as necessary acts of community policing given the shortcomings of Roblox’s own moderation systems. Within days, several Roblox video creators in its official Stars Program quit in protest and hashtags like #BoycottRoblox trended. The situation escalated to the point where a U.S Congressman publicly criticized Roblox and even circulated a petition calling for the CEO to resign.

Roblox likely didn’t anticipate the backlash. It's rational being that vigilantes could put players at risk or interfere with law enforcement. The company quietly affirmed its “commitment to safety” and hinted that they would handle such cases internally. This was arguably Roblox’s worst PR crisis. It appeared as though Roblox was punishing the good guys and tolerating the bad guys. The share price fell by over 10% following the Schlep incident, losing Roblox $1.5-$2 billion in market value.

Conclusion: Building a Safer Future with AI Moderation

Roblox’s turbulent journey offers a clear lesson for game studios and F2P multiplayer games. Child safety is not only a moral responsibility, ignoring it is also bad for business in more ways than one.

Prevention is better than cure, and investing in proactively robust safety measures can save your studio immeasurable pain and brand reputation in the long run. Studios can avoid similar pitfalls by adopting state-of-the art community moderation & engagement tools such as PlaySafe. By leveraging AI, your multiplayer games can:

• Detect & remove harmful content in realtime

• Identify predatory behavior patterns and intervene early

• Automate age-appropriate content controls at scale so that as your player base grows, safety scales with it

• Provide transparency through data and reports that show parents, regulators, and investors that your games are safe by design.

PlaySafe is a suite of AI community management tools designed for game developers, automating community moderation and engagement. If you are looking for the best-in-class, proven, and cost-effective way to moderate your community while increasing player engagement, request free access to PlaySafe today.