Class-Action against Coinbase Over Dogecoin Sweepstakes Ads Proceeds

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The devil is in the details or so the saying goes. And it couldn’t be any more appropriate than when reviewing the sweepstakes ads for Coinbase’s $1.2M Dogecoin Sweepstakes.

Last week, a California federal court said Coinbase users who participated in a Dogecoin Sweepstakes in June 2021 can pursue their allegations that Coinbase’s advertising of the sweepstakes was misleading.

The complaint alleges that in order to enter the sweepstakes, users had to buy or sell $100 in Dogecoin for a chance to win a cash prize. Although Coinbase did provide an alternative, free method of entry (“AMOE”), the complaint alleges that Coinbase’s email and website advertising purposely prevented consumers from learning about the AMOE.

This complaint is a perfect example of how an advertiser can structure a legally compliant sweepstakes only to fail in the marketing of it. And it is often the marketing and not the structure itself that leads to litigation and reputational harm, because let’s face it, unless you tell a consumer there is a reason to read the Official Rules, they’re highly unlikely to do so. The sweepstakes ads in question stated:

Trade DOGE. Win DOGE. Starting today, you can trade, send, and receive Dogecoin on Coinbase.com and with the Coinbase Android and iOS apps. To celebrate, 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.

Immediately following the call-to-action to “trade” for a chance to win, the ads simply stated “Terms and Conditions apply,” and underneath the call-to-action, in smaller font (and link), “see all rules and details.” There’s no suggestion anywhere that there is a free way to enter. If I’d have seen this ad, I’d have taken a screenshot and sent it to all of my colleagues to use as an example of “What Not To Do.”

If you’ve ever run a sweepstakes, you know that sweepstakes advertising is highly regulated, right down to the disclosures you’re required to make — the big one being “No Purchase Necessary to Enter.” Here, they might have even wanted to say “No Purchase or Trade Necessary to Enter.” In addition, like the DogeCoin Sweepstakes ad, if your call-to-action promotes the “purchase” method of entry, you should (ideally) also make it clear that a consumer can learn the details of the AMOE in the Official Rules by adding something like “See Official Rules for complete details, including alternate method of entry.” (See comment above about consumers not reading the rules unless you give them a reason.)

So, the next time your marketing folks want to try to push the envelope on the definition of “clear and conspicuous” or tell you “everyone else is doing it,” you might want to pick up the phone and call your friendly neighborhood advertising lawyer.

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