PayPal’s Honey Lawsuit DISMISSED — Federal Judge Gives Influencers 45 Days to Fix Potentially Misleading Claims
A federal judge dismissed the PayPal Honey Extension lawsuit on November 21, 2025, but granted influencers 45 days to amend their complaint after finding they failed to prove they were entitled to the disputed commissions under their merchant contracts. U.S. District Judge Beth Labson Freeman ruled that content creators didn’t establish concrete injury traceable to PayPal, delivering a procedural win for the tech giant while keeping the door open for strengthened claims.
This ruling emerged after YouTuber MegaLag’s December 2024 investigation exposed Honey’s alleged “cookie stuffing” practices that potentially diverted millions in affiliate commissions from content creators.
What Was the Honey Extension Lawsuit About?
The class action lawsuit, filed December 29, 2024, alleged PayPal’s Honey browser extension systematically diverted affiliate commissions from content creators by manipulating tracking cookies during online purchases. Content creators Wendover Productions LLC and Businessing LLC claimed PayPal “takes advantage of last click attribution by inserting a Honey pop-up at checkout for each customer” with the extension installed.
The complaint stated Honey replaces content creators’ affiliate tracking cookies with its own at checkout, effectively redirecting commissions even when Honey provides no discount codes. Plaintiffs claimed the extension created hidden tabs or refreshed merchant pages to overwrite tracking cookies, allowing PayPal to receive credit for sales even when Honey played no role in driving the purchase.
YouTuber and lawyer Devin Stone (LegalEagle) filed the lawsuit seeking damages and a permanent injunction to prevent Honey from continuing this practice, describing the extension as a “sleeping leech” and a “scam.”
Why Was the Lawsuit Dismissed?
Judge Freeman found the First Amended Complaint did not contain “any allegations at all about the terms of Plaintiffs’ agreements with the merchants,” making it impossible to determine whether creators were actually entitled to the disputed commissions under their contracts.
The court identified three fatal flaws in the complaint:
Missing Contract Terms: Unlike a recent ruling in the Eastern District of Virginia involving Capital One Shopping, where plaintiffs successfully established standing by citing specific contract terms, the Honey lawsuit lacked such specific contractual allegations.
Insufficient Injury Proof: The court stated “Plaintiffs’ theory at bottom amounts to no more than asking the Court to look at the state of the industry and guess as to how likely it is that PayPal has diverted commissions away from them.” A “Monte Carlo simulation” (statistical probability) showing a 97.2% chance Honey stole at least one commission from each plaintiff was deemed insufficient.
Blame the System Defense: PayPal successfully argued that alleged injury is “just as traceable to the merchants, who execute agreements with both PayPal and Plaintiffs and control the allocation or distribution of commissions.” The court found creators couldn’t establish PayPal caused their losses rather than merchants who structured agreements around last-click attribution.
The Court’s Reasoning Explained
Judge Freeman ruled that influencers’ contracts with merchants do not entitle them to the commissions that Honey is allegedly stealing, and it is not clear that their lost commissions are PayPal’s fault rather than that of the “last-click attribution system.”
The court also noted that customers authorize Honey to access and change data when they download the extension. The complaint admitted “PayPal uses the very same permissions it was granted to carry out the challenged conduct.”
The judge found that users granted Honey permission to take the actions it took when they downloaded the extension, which would undermine a Computer Fraud claim. The contract for commissions existed between the plaintiffs and the merchants, which undermines the unjust enrichment claim as long as the plaintiffs could sue the merchants.
Influencers’ Opportunity to Amend Claims
Judge Freeman’s order allows plaintiffs to file an amended complaint addressing the standing and authorization issues, but prohibits adding new claims or parties without court permission. Content creators have 45 days from the November 21 ruling to strengthen their case.
To succeed, the amended complaint must:
- Include specific terms from affiliate agreements with merchants
- Demonstrate contractual entitlement to commissions regardless of subsequent attribution changes
- Prove concrete injury directly traceable to Honey’s actions, not the attribution system itself
- Show how Honey’s conduct violated specific contractual provisions
Stone reported that more than 1,000 creators had expressed interest in joining the class action.
Original Legal Claims Filed
Plaintiffs brought this class action under the Electronic Communications Privacy Act (ECPA), Computer Fraud and Abuse Act (CFAA), California’s Unfair Competition Law § 17200, California Invasion of Privacy Act (CIPA), Comprehensive Computer Data Access and Fraud Act (CDAFA), and other state and federal statutes.
The lawsuit requested injunctive relief to stop Honey from replacing affiliate cookies, as well as monetary damages for the affected content creators, seeking damages exceeding $5 million.
The complaint alleges intentional interference with contractual relations, intentional interference with prospective economic relations, and requests injunctive relief to prevent ongoing practices.
Key Allegations & Evidence
The investigation found that Honey allegedly uses a sneaky process of swapping in its own tracking cookies at the end of the consumer’s purchasing journey, to essentially guarantee it will “win” the last click, so that Honey gets any commissions for the sale.
The Cookie Replacement Mechanism: The extension allegedly executed this diversion through a concealed browser tab that simulated a new referral click. A small tab is opened on the user’s browser that acts like a simulated affiliate referral link, even though the customer is already on the website and at the checkout page.
Three Diversion Methods: The legal complaint outlines three specific mechanisms through which Honey allegedly diverts commissions: direct replacement of affiliate tracking cookies, incentivized diversion through the “Honey Gold” rewards program, and commission capture through interface elements like the “Got it” button.
Scale of Impact: Data analysis showed Honey sponsored approximately 5,000 videos across 1,000 YouTube channels, accumulating 7.8 billion views. When Linus Media Group, one of Honey’s largest promotional partners, discovered this practice and requested changes, Honey declined to modify the behavior, leading to termination of their partnership after approximately 160 sponsored segments that had garnered 194 million views.
PayPal’s Defense Strategy
PayPal maintains that “Honey follows industry rules and practices, including last-click attribution” and intends to defend itself vigorously.
The company’s defense centered on three arguments:
- Industry Standard Practices: PayPal argued last-click attribution is simply how affiliate marketing works, and companies operating within that system bear no liability.
- User Authorization: Customers authorize Honey to access and change data when they download the extension.
- Merchant Responsibility: PayPal shifted blame to merchants who control commission allocation through their choice of attribution models and separate agreements with technologies like Honey.
Timeline: December 2024 to November 2025
- December 22, 2024: YouTuber MegaLag released investigation analyzing hundreds of documents and communications between Honey and merchants
- December 29, 2024: Class action lawsuit filed in U.S. District Court for the Northern District of California
- January 2, 2025: First Amended Complaint filed by Businessing LLC, Wendover Productions LLC, and other creators
- January 3, 2025: GamersNexus filed second class action through Cotchett, Pitre & McCarthy, claiming conversion, interference with contract relations, and violation of North Carolina’s Unfair and Deceptive Trade Practices Act
- August 11, 2025: PayPal filed motion to compel arbitration
- November 7, 2025: Court denied PayPal’s arbitration motion, ruling user agreements don’t extend to claims involving Honey’s broader business practices
- November 21, 2025: Judge Freeman dismissed lawsuit but granted 45 days to file amended complaint
Implications of the Dismissal
For Content Creators: The dismissal reveals uncomfortable truths about where attribution authority actually resides in affiliate relationships. Most affiliates assume their agreements with merchants guarantee commissions for driving customer discovery. The court’s reasoning suggests otherwise.
Merchants control commission allocation through their choice of attribution models and their separate agreements with technologies like Honey. This creates a three-party problem most affiliate managers overlook: Creators have agreements with merchants. Merchants have agreements with attribution tools. But creators have no contractual relationship with the tools that can override their tracking.
For Technology Companies: The decision carries implications for technology companies seeking to use consumer-facing terms of service to avoid litigation over separate business practices. If courts consistently accept the logic that last-click attribution is simply how affiliate marketing works, brands and technology companies gain broad protection for attribution practices that systematically disadvantage content creators.
For Affiliate Marketing Industry: For brands running affiliate programs, this precedent signals urgent need to clarify attribution responsibilities in publisher contracts. The ruling exposes fundamental vulnerabilities in how affiliate agreements define commission entitlements and attribution responsibility.
What Happens Next
The denial of arbitration means discovery proceedings can advance, potentially providing plaintiffs access to internal PayPal documents and data about Honey’s affiliate practices.
Content creators must file an amended complaint by early January 2026 (45 days from November 21, 2025) that includes:
- Specific merchant contract language
- Evidence of contractual commission entitlement
- Direct proof of Honey-caused injury separate from attribution system effects
The arbitration ruling represents a procedural victory for content creators but does not address the merits of their substantive claims. PayPal’s separate motion to dismiss has now been granted, but with leave to amend.
Industry Fallout & Changes
Chrome Web Store data shows Honey has declined from over 20 million users before the December 2024 investigation to 14 million users as of July 2025. As a result of the controversy, Honey lost roughly 3 million of its 20 million users within two weeks of the allegations surfacing.
In March 2025, Google updated their policies for extensions published to its Chrome Web Store, explicitly disallowing extensions that claim affiliate commissions without providing discounts. Subsequently, Honey updated their extension to stop claiming affiliate revenue in cases where they are not able to provide a discount.
WordPress founder Matt Mullenweg characterized the situation as “particularly egregious behavior” by PayPal in a social media post.
Legal Lessons From the Honey Case
For Affiliates: Written contracts matter more than industry assumptions. Without clear contractual language guaranteeing commissions regardless of subsequent attribution changes, creators couldn’t establish that PayPal caused their losses.
For Plaintiffs: Statistical probability isn’t enough. Courts require specific evidence of actual injury tied directly to defendant’s actions, not industry-wide systems.
For Defendants: The “industry standard” defense works when plaintiffs can’t prove contractual violations. Framing challenged conduct as operating within accepted industry practices can shift liability to merchants.
Recent Updates & Current Status
The case remains active with multiple related lawsuits consolidated in the Northern District of California. On March 25, 2025, the court appointed Karina G. Puttieva to the Executive Committee for the Offensive Discovery team.
On January 15, 2025, plaintiffs filed Oganesyn, et al. v. PayPal, Inc. before the U.S. District Court for the Northern District of California. Multiple law firms including Cohen Milstein, Lieff Cabraser, Girard Sharp, and Cotchett Pitre & McCarthy are representing affected content creators.
PayPal acquired Honey for $4 billion in 2020. The extension faces ongoing scrutiny from content creators, regulators, and consumers following revelations about its affiliate practices.
FAQ: PayPal Honey Extension Lawsuit
Was the PayPal Honey lawsuit dismissed?
Yes, but with a critical caveat. On November 21, 2025, Judge Beth Labson Freeman dismissed the lawsuit but granted influencers 45 days to file an amended complaint addressing standing and authorization issues. This means the case isn’t permanently closed—content creators get another chance to strengthen their claims.
Why was the Honey lawsuit dismissed?
The court found the complaint didn’t contain “any allegations at all about the terms of Plaintiffs’ agreements with the merchants,” making it impossible to determine whether creators were entitled to disputed commissions under their contracts. Without proving contractual entitlement, creators couldn’t establish PayPal caused their injury.
Can influencers refile the Honey lawsuit?
Yes. Judge Freeman’s order allows plaintiffs to file an amended complaint but prohibits adding new claims or parties without court permission. They have until early January 2026 to file improved allegations with specific merchant contract terms.
What did PayPal’s Honey extension allegedly do?
The lawsuit alleged Honey’s browser extension replaces content creators’ affiliate tracking cookies with its own at checkout, effectively redirecting commissions even when Honey provides no discount codes. Plaintiffs claimed the extension created hidden tabs or refreshed merchant pages to overwrite tracking cookies.
Did PayPal win the arbitration motion?
No. On November 7, 2025, the court denied PayPal’s motion to compel arbitration, ruling that PayPal’s user agreements don’t extend to claims involving Honey’s broader business practices. This allowed the lawsuit to proceed in federal court rather than private arbitration.
How many content creators joined the Honey lawsuit?
Attorney Devin Stone reported that more than 1,000 creators had expressed interest in joining the class action. Named plaintiffs include Sam Denby of Wendover Productions and Ali Spagnola, with additional lawsuits filed by GamersNexus.
What happens to Honey users?
In March 2025, Honey updated their extension to stop claiming affiliate revenue in cases where they are not able to provide a discount, following Google Chrome Web Store policy changes. Chrome data shows Honey declined from over 20 million users before December 2024 to 14 million users as of July 2025.
Legal Disclaimer: This article provides legal information about the PayPal Honey Extension lawsuit based on verified court documents, court filings, news sources, and legal analysis current as of the publication date. It is for educational purposes only and does not constitute legal advice. For specific legal advice regarding similar cases, please consult with a qualified attorney. Always verify current case status and legal developments through official court resources.
Last Updated: November 2025 | Case No. 5:24-cv-09470-BLF (N.D. Cal.)
About the Author
Sarah Klein, JD, is a licensed attorney and legal content strategist with over 12 years of experience across civil, criminal, family, and regulatory law. At All About Lawyer, she covers a wide range of legal topics — from high-profile lawsuits and courtroom stories to state traffic laws and everyday legal questions — all with a focus on accuracy, clarity, and public understanding.
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