Nineteen months after the first investigation into PayPal's coupon extension, the affiliate industry has a scoreboard: three network sanctions, one quiet reinstatement, a federal complaint that survived dismissal in full on June 22, 2026, and a merchant roster that has shrunk by roughly a fifth.

The technology journalist who first documented Honey's handling of affiliate cookies published a new instalment today, consolidating eight months of network enforcement actions, court filings and third-party measurement data into a single account of what the scandal has actually cost PayPal. The video, titled "Honey Gets Terminated as Lawsuits Proceed" and posted to the MegaLag channel, reports that a federal judge in the Northern District of California declined to dismiss any part of the content creators' consolidated class action, sending the case into full discovery.

That ruling is the most consequential item in the account, and it reverses the position PayPal held only months earlier.

A dismissal that did not hold

The procedural history is unusually long for a case that has yet to reach class certification. Content creators filed their original complaint on December 29, 2024, seeking damages above five million dollars in the United States District Court for the Northern District of California. PayPal first tried to move the dispute out of court entirely, arguing that plaintiffs holding PayPal or Venmo accounts had agreed to binding arbitration. That motion failed on November 7, 2025.

Judge Beth Labson Freeman then granted PayPal's motion to dismiss on November 21, 2025, but with leave to amend. Plaintiffs returned on January 5, 2026 with a 101-page second amended complaint containing actual merchant contract terms, naming ten plaintiffs and documenting commission percentages and qualifying-link definitions.

According to the video, a second hearing on the renewed motion to dismiss took place on June 4, 2026, with a markedly different tone from the first. The judge opened by telling PayPal's lead attorney, Richard Jacobson, that he faced an uphill argument. At one point PayPal contended that affiliate identifiers carry no intrinsic value because they are short strings of characters; the bench compared that reasoning to a dollar bill, and according to the account Jacobson replied that he did not know how to respond.

On June 22, 2026, Judge Freeman issued her ruling. Every claim survived. MegaLag described the outcome as "a huge win for content creators and a massive blow to PayPal."

A denial at this stage is not a finding of liability. It means the allegations, taken as true, state claims the court will hear. The practical effect is procedural and expensive: discovery proceeds without the shelter of a pending dispositive motion, which puts internal communications, engineering documentation and potential depositions of PayPal staff on the table. The video notes that because the disputed code predates the 2020 acquisition, Honey co-founders Ryan Hudson and George Ruan could be drawn into that process.

The mechanism at the centre of the case

The technical allegation that reshaped the litigation concerns what the investigation calls a defeat device: logic inside the extension that decided whether to respect a stand-down rule based on a profile of the person browsing.

Stand-down protocols are the affiliate industry's basic compliance mechanism. They require a browser extension to refrain from overwriting an existing tracking cookie when another publisher already owns the session. Because affiliate systems settle on last-click attribution, whichever party sets the final cookie before checkout collects the commission.

According to the amended complaint, which the video quotes from page 65, PayPal devised several methods to ignore or circumvent stand-down protocols, designing Honey to avoid standing down when it detected that the browser was likely operated by an ordinary shopper rather than a network tester or auditor. The filing sets out four criteria: account age, accumulated cashback points, presence on a blacklisted site with special rules, and whether the browser had previously visited an affiliate network's own website. The complaint characterises that last signal as the most glaring indication of intent.

PPC Land documented the architecture of that system on December 30, 2025, including rules held on cloud servers that refresh hourly, a one-hour stand-down window shortened from six minutes in 2023, and a threshold requiring 65,000 cashback points under base rules. A Rakuten-specific rule left at 5,000 points allowed the behaviour to be reproduced on the publicly available extension.

The chronology of the code itself is contested. The investigation dates the original implementation to 2017, under the founders, in encrypted form. It says the system was rebuilt in 2021, after the acquisition, with rules restructured into a new format and stored in plain text on PayPal servers - a redesign rather than an inherited artefact.

Three networks, three different penalties

The enforcement wave arrived in a two-week span in January 2026.

Rakuten Advertising moved first. An email reached partners at 01:47 GMT on January 12, 2026, stating that Honey had been terminated from the network and removed from existing affiliate programmes with immediate effect, according to Hello Partner, which reported that one recipient checked with other merchants and confirmed the notice had gone out broadly. Rakuten Advertising declined to comment on the move. PPC Land reported the same day that the termination severed access to roughly 2,000 retail merchants including Walmart, NewEgg, Sephora, Uniqlo, Lego, Vans and Dyson.

The timing was not incidental. Paragraph 253 of the amended complaint states that internal emails between Rakuten and PayPal show Honey repeatedly violated Rakuten's stand-down policies, and according to the video those violations run from as early as July 2020 through at least May 2025, continuing after the litigation began. Pages of redacted text follow in the filing. That detail complicates the reading of the termination as a purely principled act: the network had visibility into the conduct for years while continuing to earn on it.

Impact.com followed on January 16, 2026. Chief executive David Yovanno told partners that a thorough investigation had found Honey out of compliance with platform policies, that the extension had been removed from the Discovery Marketplace, and that its account was suspended while the network confirmed the necessary changes. Impact.com also said it would ship a software update to programmatically prevent the type of attribution manipulation uncovered during the investigation. PPC Land covered the suspension and its narrower scope: removal from a discovery marketplace blocks new merchant relationships without unwinding existing ones.

Awin Group, comprising Awin and Commission Factory, published a statement on January 21, 2026 written by chief executive Adam Ross. The internal investigation, it said, "has since confirmed breaches of our publisher policies." Protective actions included suspending payments and access to new advertiser programmes. Awin also disclosed that Honey had offered to fund affiliate network or third-party access to relevant source code for verification, policies letting advertisers remove unauthorised or invalid coupon codes, and advance notification of material changes to attribution or stand-down logic. PPC Land reported the Awin findings alongside the network's claim that its proprietary Soft Clicktechnology had been active throughout, which it said materially reduces misattribution risk.

Awin matters in scale terms. The video puts Honey's access through the network at more than 16,000 merchants, against roughly 2,000 at Rakuten.

PayPal's account, and the 0.1 percent figure

PayPal gave an exclusive response to Hello Partner on January 15, 2026. A spokesperson said the code causing the behaviour had been identified and no longer had an impact, that it was implemented prior to PayPal's acquisition, and that it appeared to affect less than 0.1% of Honey's traffic. Asked to elaborate, the company said Honey supports billions of shopping trips a year and that the percentage reflects the share touched by the code. The spokesperson also said the code was only recently discovered and was deactivated once identified.

Mark Grether, senior vice president and general manager of PayPal Ads, added that the company regrets the impact the situation has had on partners.

The video disputes both the discovery claim and the arithmetic. On the first point, it notes that a request for comment naming the mechanism was sent on December 18, 2025, that PayPal's lawyers responded with a cease and desist letter describing the reporting as defamatory and the practices as legal and responsible, and that the code was deactivated on January 13, 2026 - nearly a month later, and a day after the Rakuten termination.

On the second, the objection is that a percentage of traffic is meaningless without a date. Because the rules lived on remote servers, the population targeted could be widened or narrowed without shipping an extension update. The investigation says that in 2023 the logic ignored stand-down for effectively all users unless affiliate-network cookies were present, and that the 65,000-point threshold was introduced later. A share measured under the narrow rule describes a different system from the one that operated earlier.

What the damage looks like in numbers

Third-party tracking data compiled by researcher Jelte and presented in the video quantifies the commercial effect.

Honey's merchant partnerships stood at roughly 35,000 in December 2024. The figure now sits just above 28,000, a net loss exceeding 7,000 stores even after reinstatement on one network. Chrome installs tell a parallel story: PPC Land recorded the extension falling to 14 million users by July 2025, down from more than 20 million before the December 2024 report, and the video puts cumulative user losses at 7 million.

Merchant counts understate the concentration effect. Apple was among the departures, and according to the video it generated more shopping traffic than Honey's bottom 27,000 partner stores combined.

The coupon database contracted from about 90,000 codes in December 2024 to roughly 50,000. Most of that reduction came from user-sourced codes, which fell from about 29,000 to 3,000 - consistent with networks acting on the harvesting of employee, friends-and-family and veteran discount codes captured at checkout. Of the codes that remain, the video states that at least 10,000 are expired and still applied at checkout.

That last point connects to a policy change. Google updated Chrome Web Store rules in 2025 to bar extensions from claiming commissions without delivering a user benefit. According to the video, Honey responded by switching on cashback across nearly all partnered stores, with rates of 0.1% to 1% at close to 70% of cashback-active merchants, which restores commission eligibility at minimal cost.

Reinstatement, and the enforcement question

PPC Land reported on May 6, 2026 that Rakuten Rewards had published an open-source stand-down SDK on GitHub and that Honey had implemented it and returned to Rakuten Advertising. The video confirms the reinstatement in blunter terms, noting that every network involved has allowed the extension to keep operating, and characterising the combined penalties as a slap on the wrist relative to the conduct alleged.

That is the structural problem the episode leaves behind. Networks earn on the publishers they police. A termination that lasts four months, a marketplace delisting that preserves existing merchant relationships, and a payment suspension paired with a remediation plan are enforcement actions, but they are also survivable ones. The precedent set for smaller operators is visible to anyone reading the sequence.

The video also raises a conflict-of-interest allegation against the trade publication that carried PayPal's exclusive statements, noting that Honey had been a premier sponsor of that publication's flagship conference, and that the same outlet published a piece disputing the original investigation without offering a right of reply.

Why this matters for marketers

The case has moved from a dispute about one extension to a test of whether cookie stuffing and stand-down evasion carry consequences that scale with the offence.

For affiliate programme managers, the operative fact is the discovery phase. The investigation asserts that Honey logged every stand-down decision from the moment the mechanism was deployed, including which rule triggered the outcome and the original affiliate link the user clicked - which in many cases carries the referring affiliate's identifier and sometimes a name. If that telemetry was retained, per-transaction attribution of diverted commissions becomes technically feasible rather than statistical, which changes what a damages calculation can look like and what a settlement would need to cover.

For publishers and creators, the reinstatement pattern is the more durable lesson. Network membership proved to be a reversible sanction, while contractual stand-down language backed by machine-readable enforcement is the thing that persists. Rakuten's SDK is the first attempt to move that compliance from paper to code, and its value depends on whether other networks publish policy definitions in a compatible format.

The scrutiny has widened beyond one company. Bloomberg reported on July 10, 2026 that Phia, a shopping extension co-founded by Phoebe Gates, had taken credit for sales it did not drive, with allegations covering cookie stuffing and stand-down violations. Similar class actions have named other cashback and coupon tools. PPC Land has separately documented how browser extensions monetise data flows that users rarely inspect.

Advertisers running affiliate programmes across multiple networks are the parties carrying the residual exposure. Commission paid to an extension that intercepted an existing referral is commission paid twice for one sale, and the accounting for that sits in advertiser budgets rather than network revenue.

Timeline

Summary

Who: PayPal and its Honey browser extension; Judge Beth Labson Freeman of the United States District Court for the Northern District of California; content creator plaintiffs; affiliate networks Rakuten Advertising, Impact.com and Awin Group; PayPal Ads executive Mark Grether; Impact.com chief executive David Yovanno; Awin chief executive Adam Ross; and the investigator publishing under the MegaLag name.

What: A new investigative instalment consolidates the outcome of the affiliate stand-down dispute: all claims in the creators' consolidated class action survived PayPal's motion to dismiss on June 22, 2026, sending the case into discovery, while tracking data shows Honey's merchant partnerships down from roughly 35,000 to just above 28,000 and its coupon database down from about 90,000 codes to roughly 50,000.

When: The video published today, August 11, 2026. It covers events from October 2017 through the June 22, 2026 ruling, with the network enforcement wave concentrated between January 12 and January 21, 2026.

Where: The litigation sits in the Northern District of California. The network actions were taken by Rakuten Advertising, Impact.com and Awin Group across their global merchant bases, affecting retailers in the United States, the United Kingdom and Australia.

Why: The dispute turns on stand-down compliance in last-click affiliate attribution. Plaintiffs allege PayPal built and maintained logic that profiled users to decide whether to respect stand-down rules, behaving compliantly for suspected auditors while overwriting referral cookies for ordinary shoppers. With dismissal denied in full, internal records including per-decision logs become discoverable, which determines whether diverted commissions can be traced to individual affiliates rather than estimated.