For long, activists have blamed Roblox (NYSE: RBLX) for allegedly profiting off of child labor on its platform, accusing the company of exploiting young creators. Stefano Corazza who heads Roblox Studio has made some appalling comments which seem to justify what seems like obvious child labor as it helps kids make money.

Speaking with Eurogamer at GDC in late March, Corazza said that there are multiple ways to look at the alleged exploitation of young developers on the platform.

He added, “Like, you can say, ‘Okay, we are exploiting, you know, child labour,’ right? Or, you can say: we are offering people anywhere in the world the capability to get a job, and even like an income. So, I can be like 15 years old, in Indonesia, living in a slum, and then now, with just a laptop, I can create something, make money and then sustain my life.”

He said that by listening to the experience of the developers, it does not seem that they are getting exploited.

Roblox Says It Helps Young Developers Make Money

Instead of exploitation, he argued, “They felt like, ‘Oh my god, this was the biggest gift, all of a sudden I could create something, I had millions of users, I made so much money I could retire.’ So I focus more on the amount of money that we distribute every year to creators, which is now getting close to like a billion dollars, which is phenomenal.”

For context, Roblox has 3.1 million developers on its platform – many of whom are teenagers – who are free to create their games which can then be published and monetized.

At first, you may want to give Roblox some credence. Maybe this income is actually helping some young entrepreneurs around the world. But when you scratch the surface of the argument, it all goes downhill fast. The biggest problem here is that these kids are not fairly compensated for their work. Because their development work isn’t considered labor yet, it doesn’t fall under the stringent labor laws of the US (or anywhere). Obviously, if it did, Roblox wouldn’t be able to farm out the hard work to kids and developers aren’t given the protections they deserve under the law.

These developers are paid in the in-app currency known as Robux. There are however multiple issues with how developers on Roblox are paid. Firstly, one has to accumulate 30,000 of these Robux (down from 100,000) before they are paid.

Secondly, Roblox charges hefty fees on developers looking to cash out. While the company sells 1,000 Robux for $12.50, developers are paid only $3.5 per 1,000 Robux. Apart from Roblox, these can also be used elsewhere on the internet including on some third-party exchange and gambling sites. These gambling sites are used by regular Roblox users (again, almost entirely children) too, setting them down an extraordinarily dangerous path of addiction.

Given the high fees, some of the young developers on the platform instead chose to use these Robux for in-game purchases instead of cashing out, handing their hard earned money right back to Roblox’s shareholders.

So even though a few young entrepreneurs might be making a bit of money from hours and hours of work, does any of this really sound remotely fair? Of course not. And it likely won’t change unless Roblox’s tactics are struck down by the courts.

Roblox Faces Several Lawsuits

Roblox is facing several lawsuits over allegations of child labor and its targeting of kids’ gaming addiction. Earlier this year, Atlanta-based law firm Bullock Ward Mason filed a class action lawsuit against Roblox on behalf of several parents.

The lawsuit accused Roblox of misleading advertising, labor law violations, false advertising, and exploitation of child labor by offering them a “worthless digital currency” for their labor.

The lawsuit added, “By the time children or parents learn about the dangers associated with Roblox and its unfair practices taking advantage of children, users are so addicted to the game they cannot stop purchasing and spending Robux to continue gameplay.”

In another lawsuit, two mothers alleged that Roblox allowed an illegal gambling ring that preyed on their children. Roblox asked a federal judge to dismiss the lawsuit but earlier this week the judge ruled the case to proceed. Roblox however received a slight reprieve as the judge dismissed the more serious Racketeer Influenced and Corrupt Organization (RICO) allegations.

RBLX Has Become a Multi-Billion Dollar Enterprise

Thanks to Roblox’s popularity – an estimated 75% of kids in the US between 9-12 use Roblox every month – the company which was founded in 2006 has become a multi-billion-dollar company with a market cap of around $23 billion.

rblx stock

Such was the craze for the stock that the company delayed its IPO which was originally scheduled for December 2020 to the next year. It eventually opted for a direct listing and had a market cap of over $45 billion on its first trading day. Its market cap has since dipped to just over $23 billion but it is up 26% over the past 6th months as investors ignore the company’s dangerous practices and pending legal troubles.

All said, Roblox still hasn’t addressed the allegations of child labor and if anything, Corazza’s comments only add fuel to the fire. The comments are nothing short of a PR disaster for the company which has for long tried to justify its business model which relies on the labor of kids who many believe are not paid enough for their work.