U.S. Supreme Court Hears Coinbase Arbitration Case

News | March 22, 2023 By:

On Tuesday, March 21, 2023, the U.S. Supreme Court heard arguments from crypto exchange Coinbase that district court proceedings should be suspended and that the class action lawsuits against them should go to arbitration.

The classification, legality, or regulation of cryptocurrencies are not specifically addressed in the Coinbase v. Bielski case, which claims the crypto exchange violated the law after it failed to reimburse him for $31,000 he lost when he was defrauded by another user posing as a representative of payment processing company PayPal. But it could be significant for Coinbase and other crypto businesses when they run into problems with customers.

During the oral arguments, Coinbase, the second largest crypto exchange by volume, argued that a company appeal should stop a case from progressing through the courts until the appeal is decided.

In April, the Northern District of California court denied Coinbase’s motion to seek arbitration, which is outlined in the company’s user agreement. According to the court, the user agreement’s arbitration clause is “unconscionable” and that Coinbase is using a “litigation gimmick” to gain leverage over its clients.

Neel Kumar Katyal, a lawyer representing Coinbase, told the justices that the right to immediate appeal would “effectively” be withheld from Coinbase if a district court is allowed to proceed with a lawsuit.

Some justices disagreed with Coinbase’s arguments, and several raised concerns about the ramifications for defendants looking to arbitrate consumer disputes, Reuters reported.

According to Chief Justice John Roberts, Congress already provided a “huge benefit” in the form of immediate appeals in the event of an arbitration denial. The arbitration option is said to be more convenient for businesses than going to court and that it benefits the defendants.

Justice Brett Kavanagh, on the other hand, called Coinbase’s concern “realistic,” stating that “they say they have a congressionally afforded right to an appellate determination of whether arbitration is the appropriate forum and they’re not really going to be able to get that if they’re coerced into a massive settlement.”

The Supreme Court will also hear arguments in the Suski v. Coinbase case, in which the company is accused
of violating consumer laws during a crypto giveaway.