Coinbase Dogecoin Sweepstakes Misleading Ads Class Action

Coinbase Global, Inc., one of the largest cryptocurrency exchanges in the world, has now gone public. Among the cryptocurrencies it sells is Dogecoin, and to promote trading in Dogecoin, it hired Marden-Kane, Inc. to run a sweepstakes for that cryptocurrency. However, the complaint for this class action alleges that ad campaigns were “intentionally false and misleading,” in order to make people think that they need to buy or trade Dogecoin in order to enter.

The class for this action is all persons who opted into Coinbase’s $1.2 million Dogecoin Sweepstakes, and who bought or sold Dogecoins on a Coinbase exchange for $100 or more between June 3, 2021 and June 10, 2021.

Coinbase is not a typical exchange in that it does not simply facilitate transactions between buyers and sellers. Instead, users pay Coinbase a commission for each purchase or sale they make. The complaint alleges that Coinbase’s “financial and operational health depends upon its ability to sell and resell its ‘cryptos’ to consumers in exchange for traditional currencies like U.S. dollars.”

Dogecoin, one of the cryptocurrencies it handles, was started as a joke, but the currrency has become popular, particularly among younger people. The complaint claims, “The price of one Dogecoin was less than one U.S. penny as of January 2021, before spiking as high as $0.70 per Dogecoin in May 2021.”

Coinbase announced it would begin buying and selling Dogecoin on June 3, 2021 “if liquidity conditions [were] met.” However, the complaint alleges, “Given, however, the huge amount of commissions that Coinbase would earn from any surge in Doge trading, Coinbase had no intention of leaving Doge’s ‘liquidity conditions’ up to chance or up to natural consumer sentiment.” Instead, it decided to give people an incentive to begin trading it immediately.

On the June 3 date, Coinbase began advertising its $1.2 million Dogecoin Sweepstakes. It claimed that “we’re giving away $1.2 million in Dogecoin. Opt in and then buy or sell $100 in Doge on Coinbase by 6/10/2021 for your chance to win.”

On the pages advertising the sweepstakes was a much less prominent link to “See all rules and details.” Much larger than this were the notices about prizes and a larger link to “See how to enter.”

If users had gone to the deemphasized Rules and Details page, they would have discovered that they could enter without trading in Dogecoin at all. As an alternative, they could mail Coinbase a 3×5 index card bearing their address, e-mail address, phone, and date of birth.

The complaint alleges that the ads were designed to cause users to skip the “rules and details” page, and to believe they had to make the trade to enter. It claims that the intentionally false and misleading ad campaign caused users to pay Coinbase “many millions of dollars in purchases and commissions” which they did not actually need to spend to enter the sweepstakes.

Article Type: Lawsuit
Topic: Consumer
Tags: Contest Rules, Cryptocurrency, Deceptive Advertising