Coinbase Sued For Misleading Sweepstakes Advertising – Media, Telecoms, IT, Entertainment

On October 19, Coinbase Global, Inc. (“Coinbase”)
filed a 
motion to compel arbitration in the proposed class action
arising out of its “Dogecoin Sweepstakes.” Dogecoin
traders (collectively, “Traders”) brought a 
class action lawsuit against Coinbase and Marden-Kane,
Inc. (“MKI”) (collectively the “Defendants”)
for allegedly engaging in false, deceptive and misleading
sweepstakes advertising. Coinbase, one of the largest
online cryptocurrency exchanges, hired MKI to design, market and
execute a $1.2 million “Dogecoin Sweepstakes,” beginning
on June 3, 2021. The Defendant’s motion argues that Traders, by
accepting the platform’s user agreement, agreed to bring
disputes through individual arbitration and, as such, waived their
right to participate in a class action.

What is the Suski v. Coinbase Global 
class action about?

The Trader’s complaint alleges that in order to enter the
Dogecoin Sweepstakes, Trader’s had to buy or sell $100 in
Dogecoin by June 10, 2021, for a chance to win a cash prize.
Although Defendant’s did provide an alternative, free means of
entry, or AMOE, it is also alleged that Defendant’s
specifically designed their email and website advertising to
prevent users from easily finding the AMOE information. The class
is claiming that if the AMOE option had been disclosed properly to
them, they would not have given Coinbase $100, or paid Coinbase any
commission to acquire Dogecoins.

The “Dogecoin Sweepstakes” is 
yet another example of how sweepstakes advertising claims
may lead to litigation and cause reputational harm.

What are some sweepstakes advertising best
practices?

Sweepstakes Advertising

Typically, the goal of sweepstakes advertising is to generate
excitement among consumers and increase company revenue. Whether it
is the McDonalds Monopoly sweepstakes or Publishers Clearing House
offering cash for life, businesses must adhere to state and federal
laws, rules and regulations when sponsoring sweepstakes
promotions.

In the case at hand, some consumers felt that they were misled
in how Coinbase marketed its sweepstakes promotion.

Failing to include certain necessary disclaimers and disclosures
can land your sweepstakes contest in hot water. Some specific
disclosures that all sweepstakes promotions should include are:

1. language explaining that 
   no purchase is necessary for entry, and that any such
   purchase will not increase the consumer’s odds of winning a
   prize;




2. start and end dates;




3. eligibility requirements, such as minimum age and states where
   entry is prohibited; and




4. the odds of winning a prize.

Placing the aforementioned disclaimers and disclosures in a
prominent location in sweepstakes advertising are necessary steps
in running a compliant sweepstakes promotion.

Additional Compliance

Depending on jurisdiction, registration and bonding may be
required prior to commencing a sweepstakes promotion. For example,
in Florida and New York, sweepstakes that have an aggregate prize
value in excess of $5,000 must be registered and bonded. In Rhode
Island, the prize threshold for registration is $500, but there is
no bonding requirement and registration only applies to contests
conducted by brick-and-mortar businesses in connection with a
retail outlet.

After selecting a winner, the sweepstakes sponsor must notify
the winning entrant(s). The winner(s) may be required to complete
an affidavit of eligibility, any applicable tax forms, and a
publicity release. Prize winners should not be charged fees to
claim their prizes, including any shipping or handling. In
addition, certain state agencies require that an official
winners’ list be filed within a statutorily defined period of
time after prizes have been awarded.

Consult a Sweepstakes Attorney

Sweepstakes advertising is a highly regulated area that may
appear simple at first blush. Unfortunately, as many sweepstakes
sponsors have learned throughout the years, this is anything but
the case. As such, businesses should seek counsel before running
any sweepstakes promotion in order to avoid the many regulatory and
legal pitfalls that await them.

This blog post was originally posted July 16, 2021, and has been
updated to reflect Coinbase’s decision to motion to compel
arbitration.

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Consideration Element

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