Earlier this year, Coinbase ran a Bitcoin sweepstakes promotion offering
the chance to win one of six prizes, with the top two prizes
amounting to the equivalent of $1,000 USD in Bitcoin (along with
merchandise and event tickets). Note that our office has not
reviewed the Official Rules for Coinbase’s Bitcoin sweepstakes
and, as such, does not take a position as to their regulatory
propriety. Generally speaking, notwithstanding the nature of the
prize(s) awarded, sweepstakes operators must ensure that their
promotions comply with applicable state and federal regulations. As
our readers are aware, misleading sweepstakes promotions can
result in class action lawsuits and/or regulatory action.
The Coinbase Crypto Sweepstakes Lawsuit
A number of years ago, Coinbase hired a third party to put
together a cryptocurrency sweepstakes promotion on its behalf. Many
consumers created accounts and executed trades through Coinbase in
order to participate in this sweepstakes promotion. Only after
these first steps, did consumers allegedly learn that there was an
alternative, free means of entry (“AMOE”) available to
enter the sweepstakes. A separate “rules and details”
section of the promotion site made clear that consumers could also
enter the sweepstakes by mail. In their class action lawsuit filed
in the Northern District of California, Plaintiffs claimed that,
had Coinbase properly disclosed this AMOE, they would not have paid
money to enter the sweepstakes.
How Can I Run a Bitcoin Sweepstakes?
The Coinbase sweepstakes litigation proceeding has been pending
for quite a few years now, including a jurisdictional issue heard by the United States Supreme Court. As
our readers are aware, prolonged litigation can be quite time
consuming and costly. Businesses that are interested in running
Bitcoin sweepstakes promotions should employ best practices to
reduce the possibility of finding themselves defending an action in
court. Among other measures, sweepstakes operators must exercise
caution when drafting sweepstakes contest rules, as well as
disclaimers, and sweepstakes entry disclosures. For example,
sweepstakes contest rules and associated terms should always:
Make clear that no purchase/payment is necessary to enter or
win.
Include disclosures that make clear that a purchase/payment will
not increase the odds of winning.
Make clear that entrants who utilize the sweepstakes AMOE have
the same odds of winning as those who enter by making a
purchase.
Sweepstakes regulations are quite complicated and differ from
state to state. As such, it is important that sweepstakes operators
and their marketing teams secure the services of experienced
sweepstakes attorneys prior to promotion launch.
Similar Blog Posts:
California Court Sides with Coinbase in
Sweepstakes AMOE Action
Coinbase Sued For Misleading Sweepstakes
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Reminder: Quebec Sweepstakes Guidelines Exempt
U.S.-Based Contests!
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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