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.
The attorneys at Klein Moynihan Turco have decades of experience in assisting businesses with assorted sweepstakes promotions. If you require assistance in this area, please email us at info@kleinmoynihan.com or call us at (212) 246-0900.
The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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