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Investing.com -- Roblox Corporation (NYSE:RBLX) stock declined 3.8% in premarket trading Friday after Louisiana Attorney General Liz Murrill filed a lawsuit against the popular gaming platform, alleging it facilitates child sexual exploitation and lacks adequate safety measures.
The lawsuit, filed in Louisiana’s 21st Judicial District, claims Roblox "facilitates the distribution of child sexual abuse material" and "knowingly and intentionally fails to implement basic safety controls to protect child users from predators." The legal action seeks permanent injunctive relief, restitution, attorney’s fees, and additional civil penalties.
This legal challenge comes at a sensitive time for Roblox, which has seen its shares more than double this year, advancing over 115% YoY. The platform reports that approximately 40% of its nearly 82 million daily active users are under 13 years old.
The Louisiana lawsuit cites a specific incident in Livingston Parish where law enforcement discovered a suspect possessing child sexual abuse material while actively using Roblox with voice-altering technology designed to mimic a young female’s voice.
The legal action follows a separate controversy involving Roblox’s decision to ban a content creator known as "Schlep," who had gained popularity for exposing alleged child predators on the platform. This ban has sparked significant backlash, with over 50,000 users reportedly petitioning for CEO David Baszucki’s removal.
TD Cowen analyst Doug Creutz noted, "Our view has always been that, given Roblox’s massive user base (110+MM daily users, heavily skewing young) and a business model that depends on user-generated content and social interaction—exactly the areas that create the most risk for child safety issues—regulatory risk is non-negligible."
Oppenheimer analyst Martin Yang added, "Platform abuse, or any content and user behavior that violates a platform’s term of services, is an inherent challenge of operating any large-scale social platform. For Roblox, it means the company cannot instantly eliminate all of questionable content and completely eradicate bad actors like child predators."