What Is An NFT Sweepstakes AMOE? – Media, Telecoms, IT, Entertainment

To attract consumers in this increasingly competitive
environment, NFT minters turn to promotional NFT contests to both generate
excitement among consumers and increase company revenue. Where
minters decide to market their NFTs through sweepstakes, they must
adhere to relevant state and federal laws, rules, and regulations.
For example, while minters may allow participants to enter contests
by purchasing their NFTs, unless a free alternative means of entry
(“AMOE”) is offered, these contests will violate
applicable state lottery laws. Further, minters must properly
disclose their NFT sweepstakes AMOE in the contest rules,
disclaimer, and marketing materials. 

Sweepstakes Consideration

A lottery is made up of 3 elements: prize, chance, and consideration.
Lotteries are only legal if run by state governmental agencies.
However, if the element of consideration is removed, a lottery
becomes a legal sweepstakes. 

Consideration is defined as the exchange of anything of value.
In practice, sweepstakes consideration can take the form of any
transaction that involves a monetary payment or quid-pro-quo.
Courts have found consideration to be present where: (1) entrants
were required to watch multiple long video advertisements; (2)
entrants were required to link multiple promotion-related posts to
their own social media; or (3) winners were required to submit
payment in order to claim their prizes. 

Sweepstakes sponsors may accept sweepstakes consideration,
provided that they offer a free AMOE. 

NFT Sweepstakes AMOE

Where an NFT contest advertises that consumers may gain entry
through the purchase of an NFT (or other consideration), an AMOE
must be offered. Common AMOEs include entry through U.S. Mail,
email, or calling a toll-free number. Please note that entrants who
utilize the free AMOE method must be given the same opportunity,
with the same odds, to win all featured NFT prizes.

Notably, AMOEs must be disclosed in a “clear and
conspicuous” manner. AMOE disclosures should be included in
the sweepstakes contest rules, the sweepstakes disclaimer, and all
relevant marketing material. These disclosures should clearly state
that no purchase is necessary to enter the contest
and that a purchase will not increase the odds of winning.
Operators who fail to include proper NFT sweepstakes AMOE
disclaimers and disclosures may find that their promotional
contests become the subject of litigation.

Suski v. Coinbase Global  Class Action

For example, Dogecoin cryptocurrency traders (collectively,
“Traders”) recently brought a class-action lawsuit against Coinbase
Global, Inc. (“Coinbase”) and Marden-Kane, Inc.
(“MKI”) (collectively the “Defendants”) for
allegedly engaging in false, deceptive, and misleading sweepstakes
advertising. Coinbase, one of the largest online
cryptocurrency exchanges, hired MKI to design, market, and execute
a $1.2 million “Dogecoin Sweepstakes” that began on June
3, 2021.

In their complaint, the Traders allege that they had to buy or
sell $100 in Dogecoin in order to enter the sweepstakes. Although
Defendants did provide an AMOE, Traders allege that Defendants
specifically designed their email and website advertising to
prevent users from easily finding the AMOE information. The Traders
have alleged that Defendant’s marketing misled them, claiming
that they would not have paid the consideration (traded Dogecoin)
if the NFT sweepstakes AMOE option had been properly disclosed.

This case highlights the fact that in order to run a compliant
sweepstakes promotion, NFT minters must disclose the AMOE option in
a prominent location in all sweepstakes advertising.

Get Help with Your NFT Sweepstakes AMOE

If operators do not take the necessary steps to ensure that
their NFT sweepstakes are compliant, they may face significant
legal and regulatory repercussions. Given these risks, it is
advisable to obtain guidance from attorneys experienced with both
NFTs and contests before conducting any NFT-related promotion or
sweepstakes. 

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guide to the subject matter. Specialist advice should be sought
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