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 Advertising
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.
