Honey's Collapse: The Full Fallout from MegaLag's Exposé

The Human and Business Cost: A Massive Exodus

The fallout for Honey was severe and measurable :

• Chrome users: Before the exposé, Honey had roughly 20 million users on the Chrome Web Store. By mid-2026, that number had dropped to between 12–13 million — a net loss of over 7 million users, or about 35% of its user base .
• Merchant partners: Honey's merchant roster shrank from approximately 35,000 in December 2024 to just above 28,000, a net loss of over 7,000 stores. Merchant partnerships on specific affiliate networks were reportedly cut roughly in half .

PayPal's Defense: 'Industry Rules' and Legal Battles

In response to the allegations, PayPal stated to The Verge that "Honey follows industry rules and practices, including last-click attribution," and that merchants ultimately determine which coupons are available through the platform . The company said it would defend itself "vigorously" against what it called false claims .

In court, PayPal saw a mix of outcomes. It obtained a dismissal with prejudice of a false-advertising class action brought by 6.8 million UK residents in June 2026 . However, its most significant legal battle, the creator class action, was far from over.

The Legal Turning Point: LegalEagle vs. PayPal

On December 29, 2024, three law firms — including one operated by prominent YouTuber LegalEagle — filed a consolidated class-action lawsuit on behalf of creators like Wendover Productions and Ali Spagnola . The suit alleged intentional interference with contractual relations and deceptive affiliate-link overriding .

The legal journey was a rollercoaster :

• November 2025: A federal judge dismissed the initial complaint with leave to amend. She ruled that the creators had not yet proven they were entitled to the disputed commissions under their specific contracts with merchants .
• June 22, 2026: This was the major hurdle. U.S. District Judge Beth Labson Freeman denied PayPal's motion to dismiss the second amended complaint. The judge found that the updated complaint plausibly alleged that each named plaintiff lost commissions they were contractually entitled to because of PayPal's alleged actions . This ruling means the case will move forward toward the discovery phase, where the plaintiffs can seek internal communications and testimony from employees .

The case, formally titled In re PayPal Honey Browser Extension Litigation, is now proceeding in full .

Industry-Wide Policy Changes: Google and Rakuten React

The controversy also spurred two major industry players to change their rules to prevent similar tactics :

• Google (March 2025): Google updated its Chrome Web Store Affiliate Ads Policy. The new rules explicitly prohibit extensions from adding, modifying, or replacing affiliate links, codes, or cookies unless the user takes a clear, transparent action and the extension provides a direct benefit (like a discount) . This was a direct response to the Honey scandal .
• Rakuten Advertising (January 2026): Rakuten removed Honey from its affiliate network entirely, cutting its access to approximately 2,000 retailers . The network also introduced a new system designed to prevent browser extensions from overwriting tracking codes .
• Impact.com: Another major affiliate network, Impact.com, also suspended Honey's account and removed it from its marketplace .