A federal judge has denied Coinbase's request to compel a lawsuit over Dogecoin's decisions, allowing the case to continue in court. The lawsuit concerns the requirements for crypto exchange users to enter the 2021 “Trade Doge, Win Doge” promotion.
In the year A class action lawsuit filed in 2021 accuses Coinbase of concealing that users could enter a $1.2 million Dogecoin giveaway without having to trade $100 of the cryptocurrency on the platform, Reuters reported. It is a separate legal action from the lawsuit filed against Elon Musk over alleged price manipulation.
Coinbase's lawsuit, led by plaintiff David Susky, contends that Coinbase intentionally hid the free mail login option in order to increase trading volume and transactions for the new Dogecoin listing.
“The official rule is that the parties to the arbitration clause of the user agreement confirm their intention not to be governed by the user agreement when resolving disputes regarding the law,” the Ninth Circuit affirmed in United States of America under Law 360, which decided to keep the claim in court. The Supreme Court will review the decision. This marks the second case over arbitration rules used by a crypto exchange to reach the Supreme Court in the past year.
According to the lawsuit, Coinbase's sweepstakes rules include free entry by mailing a 3×5 index card as required by law. However, the promo allegedly hid this option in poor and small print to get users to pay the $100 entry fee.
“Coinbase knew that people who realized they could enter the sweepstakes for free would choose to enter the sweepstakes for free rather than buy $100 of Dogecoin,” the complaint said.
The indictment alleges that Coinbase intentionally concealed the free entry method to increase transaction volume for the new Dogecoin listing. The exchange added support for the meme cryptocurrency before launching the giveaway.
“Coinbase was able to significantly increase Dogecoin's trading volume and revenue by concealing the fact that consumers could enter the Sweepstakes for free,” the complaint states.
Susky claims Coinbase would not have charged $100 to join had it properly disclosed the free entry scheme, and claims it violated California's false advertising and unfair competition laws. The class action seeks more than $5 million in damages on behalf of winning participants who paid $100 entry fees.
Coinbase tried to push the lawsuit out of court and into private arbitration, citing arbitration agreements that users sign when they open accounts. However, a judge has ruled that the California courts will replace the platform's signature agreements with winning terms.
“We hope that the court, like any judge, will uphold Coinbase with clear language that is favorable to consumers,” Susky counsel David J. Harris Jr. of Finkelstein & Krinsk LLP told Law360.
The crypto exchange succeeded in suing another user last year. However, he now has to convince the Supreme Court to overturn the lower court decisions in the Dogecoin case.
Winners of the “Trade Doge, Win Doge” contest are promised prizes of up to $300,000 in Dogecoin following the token's listing on Coinbase. However, many subscribers felt misled when the free login option was later turned on.
Angry users on online crypto forums like Reddit accused Coinbase of hiding the free entry scheme to “increase interest and trading volume” for the new Dogecoin listing.
“This is such a scam. I'm really shocked that a public company would do this,” wrote a Redditor in the R/Coinbase subreddit.
The controversy highlights ongoing criticism of Coinbase's handling of Dogecoin, with some critics arguing that the meme token's listing lacks substance beyond public and trading fees.
