Chipotle Scores Key Ruling: Rewards Points Are Not ‘Gift Cards’ Under NY and CA Law

As a result, the plaintiffs’ claims challenging the company’s 180‑day expiration policy for rewards points were dismissed without leave to amend. The decision provides welcome clarity for retailers and brands operating loyalty programs in the nation’s two most demanding consumer markets. Specifically, points-based rewards can lawfully expire if they are not sold or issued as prepaid stored value and otherwise lack the hallmarks of a gift card.

Background

Chipotle’s rewards members earn 10 points for every dollar spent in the restaurant, in the mobile app, or online, which can be redeemed to unlock various rewards, including food items, donations, and apparel. In July 2024, consumers filed a class action against Chipotle, alleging that Chipotle’s policy of issuing rewards points that expire after 180 days violates California and New York laws that prohibit merchants from issuing gift certificates that expire. Chipotle filed a motion to dismiss these claims, asserting that its rewards points are not “gift certificates” as defined under the California and New York statutes.

Drawing a Distinction Between Gift Cards and Chipotle’s Rewards Points

In a December 1 order on Chipotle’s motion to dismiss, the court drew a sharp distinction between traditional gift certificates and Chipotle’s rewards points:

• The points are neither purchased for value nor loaded on a prepaid basis. Instead, they accrue incidentally through purchases and are later redeemed for menu items, rather than functioning as stored value usable across transactions.

• They are not “certificates” purchased to be redeemed in the future and do not state or reflect a cash value or a specified, pre-funded amount.

On the California side, the court applied the ordinary meaning of “gift certificate” and aligned with precedent, distinguishing Chipotle’s rewards points from purchased, prepaid instruments, including prepaid credits or redeemable certificates. The opinion also rejected the argument that California’s statute regulating “gift certificates distributed pursuant to an awards, loyalty, or promotional program” transforms all loyalty credits into gift certificates. Instead, the court read that provision as addressing only those instruments that already qualify as gift certificates, refusing to expand the statutory definition.

Under New York’s statute, the analysis was even more straightforward. New York expressly defines a “gift certificate” as “a certificate, electronic card, or other pre-funded record” that is “issued in a specified amount” and “is purchased and/or loaded on a prepaid basis.” Because Chipotle’s points are not issued in a specified dollar amount and are not purchased or pre-funded, they fall outside the law’s sweep.

In concluding that Chipotle’s rewards points are not gift certificates under either California or New York law, the state-law expiring rewards points claims failed as a matter of law. While the court dismissed the expiring rewards points claims with prejudice, the case continues on separate allegations concerning Chipotle’s fee disclosures for delivery orders.

Practical Takeaways for Loyalty Programs

For businesses offering points-based loyalty programs in New York and California, the ruling underscores a practical compliance roadmap. Where rewards points are not pre-funded but are instead earned through activity and lack a stated dollar value, they are unlikely to be treated as “gift certificates.” In that design posture, expiration terms can be lawful if clearly disclosed and administered as part of the program rules. By contrast, prepaid instruments, dollar-denominated credits, or transferable certificates that resemble stored value may trigger gift-card regimes, including prohibitions on expiration and other restrictions.

Key Takeaways

The decision is a significant win for brands that structure loyalty points as earn-and-burn credits rather than prepaid stored value. In both New York and California, such points are likely not treated as gift cards and may carry expiration dates, provided they are not sold, not denominated in cash value, and are clearly governed by program terms. At the same time, companies should continue to scrutinize how fees and mandatory charges are presented at checkout as disclosure practices remain an active enforcement and litigation risk.