Coinbase goes to the Supreme Court in the first crypto case
Cryptocurrencies and crypto exchanges have received all kinds of federal attention in recent years. From The Security and Exchange Commission to Ministry of Justice to United States Senate– Many public agencies and legislators have started to weigh in on blockchain business. Now the Supreme Court intervenes for the first time.
The US Supreme Court is hearing arguments in its first ever crypto-related case on Tuesday. The matter, Coinbase v. Bielski, is not specifically concerned with the classification, legality or regulation of cryptocurrency. Rather, it is the Supreme Court set to decide either Coinbase, Inc., the operator of the second largest crypto exchange, could force two separate customer class actions into arbitration and put other legal proceedings on hold in the meantime.
While not the most exciting or technical lawsuit, it could have broad implications for how crypto companies handle customer complaints going forward. It will also likely be followed by a number of future cryptocurrency cases heading to the Supreme Court – including the ultimate question of whether how crypto is classified and regulated. “It’s just the tip of the tip of the iceberg when it comes to crypto-related litigation,” Gerard Comizio, professor of business law at American University, told Bloomberg.
A case pending in New York federal court, involving The SEC and the crypto company Ripplecould proceed to appeals and finally the Supreme Court. Grayscale Investments, another crypto company, has also indicated that it would be willing to take its ongoing case to the Supreme Court, according to Bloomberg.
But what is Coinbase v. Bielski about?
Tuesday’s hearing concerns compulsory arbitration. Coinbase is fighting two separate customer lawsuits, both of which the company has argued should not be allowed to go to court. Instead, the crypto exchange wants to take them to arbitration and stop all other legal proceedings in the meantime.
Arbitration is an alternative remedy of dispute resolution that takes place outside the legal system. It is often preferred by companies and included as a mandatory clause in employee and customer contracts (ie “any dispute … will be settled by binding arbitration). In practice it is generally favors corporationsnullifies the potential for class actions by atomizing aggrieved parties into individual plaintiffs, and hides proceedings behind closed doors—eliminating the more transparent and public record of a trial.
Coinbase, like many companies, includes an arbitration clause in its user agreement. Still, two class action lawsuits against the crypto exchange have gotten this far because lower courts in California has ruled that Coinbase’s arbitration clause is “unconscionable” and uses a “legal gimmick” to favor the company over its customers.
Consumer and champions of workers’ rightsalong with many Democratic lawmakers, are not fans of compulsory arbitration, but the Supreme Court historically has been. Ultimately the conservativecurrent set of judges are expected to side with Coinbase, according to SCOTUSblog’s analysis.
Why are Coinbase customers suing in the first place?
The first of the class-action lawsuits at the center of the Supreme Court case focuses on a complaint by plaintiff Abraham Bielski, who claims Coinbase should compensate him for funds lost to a crypto scammer. Bielski says he lost $31,000 after falling for a scam in which someone impersonated a PayPal representative.
The other class action, Suski v. Coinbase, is over a competition that the lead plaintiff and other customers claim was deceptive. To enter the “million-dollar” event, some customers say they were led to believe they needed to trade $100 in dogecoin. But apparently anyone could participate – regardless of dogecoin buying/selling.
Coinbase has been facing an increasing number of customer lawsuits. If the Supreme Court ends up ruling in the company’s favor, as expected, many of these legal headaches could all but disappear into the black hole of corporate arbitration.
