In a recent development, the United States Supreme Court delivered a favourable verdict for Coinbase Global Inc., a leading cryptocurrency exchange, in a contentious arbitration matter. The ruling puts a halt to ongoing customer lawsuits while Coinbase furthers its appeals for transferring these disputes from courts to private arbitration, a move preferred by many businesses over litigation.
A Favorable Verdict for Coinbase
In a 5-4 decision by the justices, a lower court’s ruling was overruled. The case involved a user who sued after losing money from his account due to a scam. The lower court had previously allowed a proposed class-action lawsuit to continue while Coinbase pursued its appeal. The argument was that the claims should be moved to arbitration. However, the Supreme Court justices dismissed another case that Coinbase requested for review.
Generally, businesses opt for arbitration to resolve claims as it is a faster and cheaper process than court litigation. The latter proves to be a tougher battle and carries a higher risk of substantial damage awards.
We conclude that, after Coinbase appealed from the
Opinion of the Court
denial of its motion to compel arbitration, the District Court
was required to stay its proceedings. On remand, we
anticipate that the Ninth Circuit here, as we anticipate in
§16(a) appeals more generally, will proceed with
appropriate expedition when considering Coinbase’s
interlocutory appeal from the denial of the motion to compel
arbitration. We reverse the judgment of the Court of
Appeals and remand the case for further proceedings
consistent with this opinion.7
Coinbase’s Stance on Arbitration
Coinbase’s platform enables users to transact in digital currencies, such as bitcoin and ether. The company maintains that its user agreement necessitates the resolution of disputes through arbitration. Moreover, under a law known as the Federal Arbitration Act, which administers dispute resolution proceedings through arbitration, any action in trial courts must cease when a denial of a request to compel arbitration is appealed.
Conservative Justice Brett Kavanaugh, backed by four fellow conservatives, authored the ruling. Kavanaugh warned about the risks of allowing trial courts to carry on while the arbitration question remained under appeal. He stated that such a situation could lead to the benefits of arbitration — such as efficiency and cost savings — being irretrievably lost, even if the court of appeals later determined that the case should have been in arbitration to begin with.
Also read: Coinbase – How to Buy Bitcoin?
Dissenting Voices
The ruling was not without opposition. Three liberal justices and Conservative Justice Clarence Thomas dissented. Liberal Justice Ketanji Brown Jackson in the dissenting opinion asserted that the ruling created a new rule that perpetually favoured the party seeking arbitration.
Jackson wrote, “Now, any defendant that devises a non-frivolous argument for arbitration can not only appeal but also press pause on the case — leaving plaintiffs to suffer harm, lose evidence and bleed dry their patience and funding in the meantime.”
Also read: Best Cryptocurrency Exchanges | 2023.
Coinbase’s Reaction to the Verdict
Katherine Minarik, Coinbase’s vice president for litigation, expressed approval of the ruling. Minarik stated that the decision acknowledged the significant burdens borne by companies like Coinbase and their customers when cases that should be in arbitration processes instead proceed in lengthy and expensive court proceedings. She added that it made sense to pause lower court litigation while an appellate court decided whether a case should be in court at all.
Case Background
One of the cases involved a lawsuit by customer Abraham Bielski in California, who alleged that a scammer stole more than $30,000 from his Coinbase account in 2021. The suit accused the company of violating the Electronic Funds Transfer Act by not investigating or recrediting Bielski’s account.
In the other dismissed suit, former users alleged that the company violated California’s false advertising law by misleading them into paying to participate in a 2021 sweepstakes offering prizes in dogecoin, a type of cryptocurrency.
In both instances, federal judges rejected Coinbase’s attempts to push the claims into arbitration, as stipulated by the user agreements. Coinbase immediately appealed those decisions, but the San Francisco-based 9th U.S. Circuit Court of Appeals in 2022 denied the company’s requests to pause further litigation pending the appeals.
