Coinbase, Marden-Kane Settle Dogecoin Sweepstakes Lawsuit for $2.25M

Coinbase and marketing firm Marden-Kane have agreed to pay a $2,250,000 settlement to resolve a class action lawsuit brought by a disgruntled customer who participated in an allegedly “false and misleading” Dogecoin sweepstakes. The settlement, if approved by the U.S. District Court in the Northern District of California, would compensate all of the exchange’s users in the U.S. who opted into the Dogecoin sweepstakes and traded $100 worth of the meme coin during a one-week period in June 2021.

The lawsuit centered on a promotion launched alongside Dogecoin’s Coinbase trading debut, which promised a grand prize of $300,000 among smaller prizes. The promotion was free to enter, but a link on the exchange’s website detailing this key fact was disguised using small and faint text, according to Coinbase customer David Suski. Suski claimed that he would not have purchased Dogecoin on Coinbase if he had known that the exchange’s contest was free to enter, as he already owned the cryptocurrency on retail brokerage Robinhood. His lawsuit sought $5 million in damages.

“We are pleased to have reached an agreement to resolve the case, subject to the Court’s approval,” a Coinbase spokesperson stated. In terms of compensation, each member of the lawsuit’s settlement class would receive the amount of money they spent on transaction fees and “spreads” that were charged by Coinbase on their first $100 worth of Dogecoin trades during the sweepstakes’ one-week period. The lawsuit’s parties determined that Coinbase raked in around $1.3 million on users’ first $100 worth of Dogecoin trades during the sweepstakes’ short run.

The lawsuit also named Marden-Kane as a defendant, a Syosset, New York marketing agency that Coinbase tapped to administer the sweepstakes. Both parties have “long denied any wrongdoing,” arguing “a reasonable customer would have discerned payments were unnecessary for entry upon reading the ‘no purchase necessary’” language in the ad. The dispute was weighed by the U.S. Supreme Court last year, and the justices rejected an argument from Coinbase that sought to compel arbitration. The court’s denial affirmed a ruling from the United States Court of Appeals for the Ninth Circuit.

The case was first brought in June 2021, when Dogecoin's price hovered around $0.39. It now sits at $0.23. The lawsuit was brought by David Suski, a Coinbase customer who claimed that he would not have purchased Dogecoin on Coinbase if he had known that the exchange’s contest was free to enter. Suski's lawsuit sought $5 million in damages. The settlement, if approved by the U.S. District Court in the Northern District of California, would compensate all of the exchange’s users in the U.S. who opted into the Dogecoin sweepstakes and traded $100 worth of the meme coin during a one-week period in June 2021.

In summary, the settlement marks the end of a lengthy legal battle between Coinbase, Marden-Kane, and disgruntled users who felt misled by the sweepstakes promotion. The resolution underscores the importance of transparency in marketing practices, particularly in the cryptocurrency industry, where user trust is paramount. The settlement also highlights the potential legal ramifications for companies that engage in deceptive marketing tactics, even if unintentionally. The outcome serves as a reminder for businesses to ensure that their promotional materials are clear and easily understandable to consumers, avoiding any potential for misinterpretation or deception.