On November 3, 2023, the United States Supreme Court granted a writ for certiorari in Coinbase Inc. v. Suski. Before the Court is the issue of whether silence as to arbitration in Coinbase’s Sweepstakes Contest Rules affects the arbitration clause contained in its User Agreement. In general, companies prefer to arbitrate consumer complaints because it is quicker and more cost-efficient than litigation. Coinbase is hoping that the Supreme Court rules that an arbitrator, and not a court of law, should decide which of its two seemingly conflicting dispute resolution clauses controls.
What are the Primary Claims in Suski?
Over two years ago, Coinbase hired a third party to design, market, and implement a cryptocurrency sweepstakes. After reviewing email and website advertisements, Plaintiffs created accounts and executed trades through Coinbase in order to participate in the sweepstakes promotion. Only after completing these steps, however, did Plaintiffs allegedly learn there was an alternative, free means of entry (“AMOE”) to sign up for the sweepstakes. On a separate “rules and details” webpage, Coinbase made clear that consumers could also enter the sweepstakes by sending Coinbase a 3×5-inch index card containing their personal information. Plaintiffs claimed that, had Coinbase properly disclosed this AMOE, they would not have paid money to enter the sweepstakes. Plaintiffs subsequently filed a class action lawsuit against Coinbase in the Northern District of California.
In the process of signing up for a Coinbase account, Plaintiffs executed the Coinbase User Agreement, which contained a mandatory arbitration clause. When Plaintiffs signed up to enter the subject sweepstakes, they agreed to a second contract, the Coinbase Sweepstakes Official Rules. The Official Rules were silent as to arbitration. The Official Rules did, however, include a forum selection clause, which provided that California courts had exclusive jurisdiction over any disputes that might arise concerning the sweepstakes.
In accordance with its User Agreement, Coinbase filed a motion to compel arbitration. The district court denied the motion, and the court of appeals upheld the district court’s decision. The Supreme Court is now expected to rule as to which dispute resolution clause controls, and what effect it has on Coinbase’s efforts to compel arbitration.
Why Does the Coinbase Sweepstakes Lawsuit Matter to Your Business?
Coinbase has been embroiled in the Suski sweepstakes litigation matter for a few years now, which can be quite stressful and expensive. Companies engaged in sweepstakes promotions should employ best practices to reduce the possibility of finding themselves in a similar situation. Most importantly, companies need to exercise caution when drafting sweepstakes contest rules, disclaimers, and entry disclosures. For example, the contest rules and associated terms should:
- Make clear that no purchase is necessary to enter the sweepstakes.
- Include statements explaining that a purchase will not increase the odds of winning.
- Not include contradictory or confusing messaging or advertising regarding sweepstakes AMOEs.
- Make clear that entrants who utilize the sweepstakes AMOE will be given the exact odds to win as those who enter by paying.
As our readers are aware, companies face both civil lawsuits and regulatory action if they run sweepstakes promotions that are deceptive. To further complicate matters, sweepstakes regulations are quite nuanced and differ by jurisdiction. As such, it is important that sweepstakes operators and marketers obtain guidance from experienced sweepstakes attorneys.
The attorneys at Klein Moynihan Turco have decades of experience in guiding companies with their 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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