Simon's Cat game app showed adult advert
The pop-up ad featured a "temporary tattoo" that looked like a deep bite mark, placed on a woman's shoulder.
The imagery appeared in the match-puzzle title Simon's Cat Crunch Time in July. The video game app is popular among children.
Wish.com, the retailer responsible for creating the ad, failed to respond to the complaint.
The Advertising Standards Authority (ASA) said it was concerned by the San Francisco-based company's lack of response and ordered the business to ensure its adverts were properly targeted in the future.
Although the body does not have the power to impose fines itself, it can refer repeat offenders to Trading Standards, which can take further action.
The game's publisher has also banned Wish.com from serving ads to its products in the future.
However, the app has been installed more than one million times on Android and iOS devices.
The publisher, Strawdog Studios, told the ASA that it also had the power to remove ads manually.
But it added that it relied on customer reports to flag unsuitable content, and had not been alerted to the tattoo image before the watchdog had become involved.
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