The CPSC alleged that Toronto-based Spin Master knowingly produced the arts-and-crafts beads, which were coated in the "date rape" drug, gamma hydroxybutyrate (GHB), failed to report the defect and failed to test the toy adequately.
The CPSC also claims the company knowingly imported and sold a banned hazardous substance.
Spin Master denies the allegations but has agreed to pay the $1.3 million fine, which is the third largest toy-related fine the CPSC has ever issued.
About a dozen children were made sick by the beads and four million kits were recalled in 2007. The kits contained tiny colored beads that required water to stick together and form designs and shapes.
The Associated Press contributed to this story.