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Coinbase Sued for Misleading Sweepstakes Advertising

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A class action lawsuit has been introduced towards Coinbase International, Inc. (“Coinbase”) and Marden-Kane, Inc. (“MKI”) (collectively the “Plaintiffs”) for allegedly partaking in false, misleading and deceptive sweepstakes promoting. Coinbase, one of many largest on-line cryptocurrency exchanges, employed MKI to design, market and execute a $1.2 million “Dogecoin Sweepstakes,” starting on June 3, 2021.

The grievance alleges that with a purpose to enter the sweepstakes, customers had to purchase or promote $100 in Dogecoin by June 10, 2021, for an opportunity to win a money prize. Though they did present an alternate, free technique of entry, or AMOE, it is usually alleged that Plaintiffs particularly designed their e-mail and web site promoting to forestall customers from discovering the AMOE info. The category is claiming that if the AMOE possibility had been disclosed correctly to them, they’d not have given Coinbase $100, or paid Coinbase any fee to accumulate Dogecoins.

The “Dogecoin Sweepstakes” is yet another example of how sweepstakes promoting claims might result in litigation and trigger reputational hurt.

What are some sweepstakes promoting greatest practices?

Sweepstakes Promoting

Usually, the purpose of sweepstakes promoting is to generate pleasure amongst shoppers and enhance firm income. Whether or not it’s the McDonalds Monopoly sweepstakes or Publishers Clearing Home providing money for all times, companies should adhere to state and federal legal guidelines, guidelines and laws when sponsoring sweepstakes promotions.

Within the case at hand, some shoppers felt that they had been misled in how Coinbase marketed its sweepstakes promotion.

Failing to incorporate sure needed disclaimers and disclosures can land your sweepstakes contest in scorching water. Some particular disclosures that each one sweepstakes promotions ought to embody are:

  1. language explaining that no purchase is necessary for entry, and that any such buy is not going to enhance the patron’s odds of successful a prize;
  2. begin and finish dates;
  3. eligibility necessities, reminiscent of minimal age and states the place entry is prohibited; and
  4. the percentages of successful a prize.

Inserting the aforementioned disclaimers and disclosures in a outstanding location in sweepstakes promoting are needed steps in working a compliant sweepstakes promotion.

Extra Compliance

Relying on jurisdiction, registration and bonding could also be required previous to commencing a sweepstakes promotion. For instance, in Florida and New York, sweepstakes which have an combination prize worth in extra of $5,000 have to be registered and bonded. In Rhode Island, the prize threshold for registration is $500, however there isn’t a bonding requirement and registration solely applies to contests carried out by brick-and-mortar companies in reference to a retail outlet.

After deciding on a winner, the sweepstakes sponsor should notify the successful entrant(s). The winner(s) could also be required to finish an affidavit of eligibility, any relevant tax varieties, and a publicity launch. Prize winners shouldn’t be charged charges to say their prizes, together with any transport or dealing with. As well as, sure state businesses require that an official winners’ record be filed inside a statutorily outlined time frame after prizes have been awarded.

Seek the advice of a Sweepstakes Lawyer

Sweepstakes promoting is a extremely regulated space which will seem easy at first blush. Sadly, as many sweepstakes sponsors have realized all through the years, that is something however the case. As such, companies ought to search counsel earlier than working any sweepstakes promotion with a purpose to keep away from the numerous regulatory and authorized pitfalls that await them.


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