Coinbase, a major player in the cryptocurrency exchange realm, encountered a legal setback as a federal judge ruled against their attempt to transfer a lawsuit related to their Dogecoin sweepstakes into arbitration. This denial paves the way for the case to proceed within the court system. The legal dispute, filed in 2021, centers on the allegation that Coinbase misled its users regarding the prerequisites for participating in the “Trade Doge, Win Doge” promotion.
Coinbase lawsuit will not go to arbitration
In the lawsuit, the plaintiffs claim that Coinbase failed to transparently communicate that individuals could enter the $1.2 million Dogecoin giveaway without having to trade $100 worth of the meme cryptocurrency on its platform. Led by plaintiff David Suski, the class action lawsuit against Coinbase argues that the exchange purposely obscured a free entry option using mail-in methods for the sweepstakes. Their contention is that Coinbase’s concealment was a strategic move to bolster the trading volume and liquidity for Dogecoin following its listing on the platform.
The Ninth Circuit supported the decision to keep the claims in court, noting that the official rules of the sweepstakes indicated an intent not to be governed by the user agreement’s arbitration clause in addressing controversies concerning the sweepstakes. However, this decision is currently slated for review by the U.S. Supreme Court. This marks the second instance in the past year where a case involving the arbitration rules of the crypto exchange has escalated to this level. The lawsuit alleges that the sweepstakes rules indeed included a method to enter without payment by mailing in a 3×5 index card, as required by law.
Nevertheless, Coinbase’s promotional ad allegedly concealed this free entry option by placing it in small, faint print, nudging users toward paying the $100 entry fee. The legal action contends that Coinbase was aware that participants, if made aware of the free entry option, would likely opt for the no-cost entry instead of purchasing $100 worth of Dogecoin. This alleged concealment was purportedly aimed at artificially boosting the trading volume for the new Dogecoin listing on the exchange. Suski, the plaintiff, argues that had Coinbase properly disclosed the free method of entry, he and other participants would not have paid the $100 fee.
Court denial strengthens user resolve against the exchange’s tactics
The lawsuit claims violations of California’s false advertising and unfair competition laws, seeking damages exceeding $5 million on behalf of sweepstakes participants who paid the $100 entry fee. Coinbase’s endeavor to shift the lawsuit into private arbitration, referencing the arbitration agreements signed by its users during the account setup, was dismissed by the judge. The court favored the sweepstakes terms that specified California courts as the forum, which overrode the account agreements.
David J. Harris Jr. of Finkelstein & Krinsk LLP, representing Suski, expressed hope that the court would adhere to the straightforward language in Coinbase’s contracts with consumers. This lawsuit marked a shift from Coinbase’s previous success in moving another user lawsuit into arbitration last year. The “Trade Doge, Win Doge” sweepstakes promised prizes of up to $300,000 in Dogecoin after the token’s listing on Coinbase. The revelation of the concealed free entry option after the fact led to disappointment and outrage among participants.
This incident fueled discontent among users on online crypto platforms like Reddit, where users accused Coinbase of engaging in practices that artificially inflated demand and trading volume for their new Dogecoin listing. Some expressed astonishment and disappointment, considering such actions unethical for a publicly traded company. The legal battle against Coinbase unveils allegations of deliberate concealment of a free entry method for a Dogecoin sweepstakes. The court’s refusal to permit Coinbase to shift the case into arbitration signals a significant legal development in the ongoing conflict between the crypto exchange and the aggrieved users.
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