The United States Supreme Court announced on November 3 that it would review a contentious case involving cryptocurrency exchange Coinbase and a dispute with its users over a Dogecoin sweepstakes, Bloomberg News reported.
At the heart of the problem is Coinbase’s attempt to move disputes with its users from the public court system to private arbitration, a route often favored by companies for its profitability and expediency.
The Supreme Court will determine whether Coinbase can submit the dispute with its users to arbitration.
The case revolves around Coinbase’s appeal to overturn an earlier court ruling that effectively found the platform had lost its right to seek arbitration in a legal dispute arising from a 2021 drawing, which users claimed was misleading advertising.
Businesses often prefer arbitration because it is a faster and more cost-effective process than traditional court litigation, which can be more difficult to manage and carries a higher risk of substantial damages.
The big question in this case is whether a judge or arbitrator should decide which of two conflicting agreements should be followed in the dispute between Coinbase and its disgruntled users. The Supreme Court’s decision will determine whether the disagreement will be referred to arbitration or to court.
When creating their Coinbase account, users agreed to resolve disputes through arbitration. However, a subsequent agreement related to the contest stipulated that any issues related to the contest had to be resolved in a California courtroom.
When users then accused Coinbase of violating California’s false advertising law by tricking them into entering a sweepstakes offering Dogecoin prizes, they filed a class-action lawsuit in federal court. The lawsuit alleges that Coinbase misled users into paying to enter the sweepstakes, which they believed to be a false advertising campaign.
A federal judge in California denied Coinbase’s request to transfer the dispute to arbitration, saying user agreements required such a move. The ruling was later upheld by the San Francisco-based 9th U.S. Circuit Court of Appeals.
In related litigation in June, the Supreme Court ruled 5-4 in favor of Coinbase. In that case, the judges upheld Coinbase’s request to stay customer lawsuits while seeking appeals to move disputes from public courts to private arbitration.
The Supreme Court’s consideration of the case is a crucial development for companies using arbitration clauses, as it will undoubtedly have a significant impact on the formulation and enforcement of user agreements, particularly in the ever-evolving field of digital currency trading.
The ongoing legal dispute has not hampered Coinbase’s efforts to expand its services, with the company introducing new trading options for its users, including crypto futures trading.
The Supreme Court’s decision to investigate this matter underscores its commitment to defining the boundaries between arbitration and traditional court proceedings. This could set a precedent for similar cases in the future.