The Financial Times has published a paywalled report revealing that the US government is presently evaluating whether to compel the giant Chinese gaming publisher Tencent to divest from US gaming companies for national security purposes. Top officials have held internal meetings to assess whether Tencent's many investments can be allowed to continue, since they give them access to data on millions of American gamers. A cabinet-level meeting to discuss the matter was scheduled for today, but was postponed due to scheduling conflicts. US President Donald Trump is preparing to meet Chinese President Xi Jinping in China in April, so presumably, the decision will be made before that meeting.
The investigation was not started by this Trump administration, though. The Committee on Foreign Investment in the United States (CFIUS) actually began reviewing Tencent's investments during the first Trump administration, and the case has since become one of the agency's longest-running reviews. During the Biden administration, differences emerged among agencies over how to address the issue: the Justice Department favoured pursuing tougher measures, including divestiture, while the Treasury Department favoured allowing the investments to remain, with mitigation measures such as data segregation. As the agencies failed to reach a consensus, the review remained unresolved.
Tencent wholly owns Riot Games, giving it access to data from players of League of Legends and Valorant, and Turtle Rock Studios (Back 4 Blood). They also own a 28% minority stake of fully diluted shares in Epic Games (Fortnite). Those are US-based companies, but the US government is also reportedly concerned that Tencent has access to US citizens' data through games made by non-US studios, such as Supercell, the maker of the exceedingly popular mobile strategy game Clash of Clans.
A potential solution already seen with this administration is TikTok's partial divestiture, with a new entity called "TikTok USDS Joint Venture LLC," whose majority stake is held by a consortium of US investors (Oracle, Silver Lake, and MGX). This new joint venture is also responsible for US data protection, algorithm security, content moderation, and software assurance.
Riot Games is likely to be the main target of any divestiture. Tencent doesn't own the majority of Epic, and Turtle Rock is, frankly put, not big enough to matter here. Still, this could be used as a political bargaining chip at next month's meeting, so any outcome is still possible.
About the author: With over two decades of experience in gaming journalism, Alessio Palumbo has led the gaming vertical at Wccftech since August 2015. He started working at a young age for Italian websites like Everyeye.it, Gamestar.it, Nextgame.it, and Multiplayer.it before kickstarting the indie English-language publication Worlds Factory as its founder and Editor in Chief. In the last decade, he has coordinated the overall output of Wccftech's gaming section, managed PR relations, assigned reviews, produced daily news coverage, edited gaming content as needed, and delivered game reviews. Arguably, his trademark content is the long series of exclusive developer interviews that have been cited by Wikipedia and by the biggest news media and gaming publications. His passion for technology also makes him knowledgeable when it comes to gaming hardware and tech. His favorite genres include RPGs, MMORPGs, and action/adventure games.
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