Landmark Decision: U.S. Supreme Court Tackles Coinbase User Agreement Case

A pivotal legal case concerning how crypto platforms settle disputes with their users is now headed to the United States Supreme Court.

As reported by Bloomberg, SCOTUS has agreed to hear Coinbase’s appeal related to a case involving the crypto exchange’s $1.2 million Dogecoin (DOGE) sweepstakes offering in 2021.

Per the court’s website, the case addresses:

“Whether, where parties enter into an arbitration agreement with a delegation clause, an arbitrator or a court should decide whether that arbitration agreement is narrowed by a later contract that is silent as to arbitration and delegation.”

Arbitration is when a neutral third party is voted on to privately settle a dispute instead of taking it to court. Companies often like to arbitrate claims since it’s a cheaper and faster process than court litigation.

In 2021, David Suski and other plaintiffs filed a class-action lawsuit against Coinbase on behalf of any customers who had bought or traded DOGE on the exchange in amounts exceeding $100 during the sweepstakes period between June 3, 2021, and June 10, 2021.

According to Reuters, the lawsuit alleged that Coinbase had obscured the fact that customers could also enter the sweepstakes via free mail-in entry, without needing to trade any DOGE on its platform.

“Coinbase knew that sweepstakes entrants who learned that they could enter the sweepstakes for free… would choose to enter for free, rather than purchase $100 worth of Dogecoin,” reads the complaint. Hiding the free entry method allowed Coinbase to incentivize more DOGE trading volume, thus driving further profits, the complaint argued.

The Arbitration Issue

Things grew complicated after a federal judge in California refused Coinbase’s request for arbitration in December.

While the company’s user agreement specifically states that any customer disputes with Coinbase should be resolved in such a manner, a subsequent agreement specifically related to the sweepstakes said disputes over the contest would be handled in court in California.

“We are hopeful that the court, like every judge below, will hold Coinbase to the plain language of its own contracts with consumers,” Suski’s counsel, David J. Harris Jr. of Finkelstein & Krinsk LLP, told Law360 on the matter.

Back in June, the Supreme Court already voted 5-4 in favor of Coinbase to halt all court cases against the exchange while it moved those cases into arbitration, having cited the company’s arbitration clause. The vote fell down partisan lines, with conservatives voting in favor.