tl;dr
Crypto exchange Coinbase and marketing firm Marden-Kane agreed to pay a $2.25 million settlement to resolve a class action lawsuit over a Dogecoin sweepstakes promotion in June 2021. The lawsuit alleged the sweepstakes was "false and misleading" because the promotion, which promised prizes for tradi...
Crypto exchange Coinbase and marketing firm Marden-Kane have agreed to a $2.25 million settlement to resolve a class action lawsuit concerning a Dogecoin sweepstakes promotion held in June 2021.
The lawsuit claimed the sweepstakes was "false and misleading" because although the promotion promised prizes for trading Dogecoin and was free to enter, this key fact was not clearly disclosed. Specifically, a small and faint text link revealing the free entry was allegedly disguised, leading to the claim that many users were misled into trading Dogecoin unnecessarily.
The settlement, pending approval from the U.S. District Court in the Northern District of California, will refund U.S. users who traded at least $100 worth of Dogecoin during the one-week sweepstakes period by reimbursing transaction fees and spreads charged by Coinbase on those trades.
Coinbase and Marden-Kane have denied any wrongdoing, insisting that the "no purchase necessary" language was clear. The U.S. Supreme Court rejected Coinbase’s attempt to compel arbitration in the matter, upholding a ruling from the Ninth Circuit Court.
The lawsuit was initiated by David Suski, a Coinbase customer who claimed he would not have purchased Dogecoin on Coinbase had he known the sweepstakes was free to enter since he already owned Dogecoin on another platform. Suski initially sought $5 million in damages.
During the promotion, Coinbase reportedly earned around $1.3 million from users trading their first $100 worth of Dogecoin, highlighting the financial impact behind the dispute. Marden-Kane, the marketing agency responsible for administering the sweepstakes, was named as a defendant alongside Coinbase.
Coincidentally, Dogecoin’s market price has seen considerable volatility since the sweepstakes. On June 3, 2021, the day the sweepstakes launched, Dogecoin traded near $0.39. This followed a peak around $0.69 just weeks earlier spurred by Tesla CEO Elon Musk's high-profile SNL appearance. Currently, Dogecoin is priced at approximately $0.23, experiencing fluctuations tied to broader market trends and geopolitical tensions.
In a related development, separate legal action against Elon Musk, accusing him of misleading investors through his public statements about Dogecoin, was filed but later dropped, underscoring ongoing legal and regulatory scrutiny around the meme coin.
This settlement marks an important moment in the oversight of crypto promotions, reminding users to carefully read the fine print and regulators to monitor advertising transparency in the booming cryptocurrency space.