Supreme Court rules in favor of Coinbase in arbitration dispute

U.S. Supreme Court backs cryptocurrency exchanges on Friday Coinbase Global CorporationThe company seeks to block customer lawsuits while it pursues appeals, aimed at moving disputes from court to private arbitration, which businesses typically prefer over litigation.

In a 5-4 decision, the judge overturned a lower court ruling involving a lawsuit filed by a user after scammers stole funds from his account. A lower court allowed a proposed class action to proceed while Coinbase appealed, arguing that the claims were subject to arbitration. The judge dismissed the second case that Coinbase asked it to review.

Companies often prefer to arbitrate claims because the process is cheaper and faster than court proceedings, which can be harder to fight and carry a greater risk of large damages.

Coinbase’s exchange allows users to trade digital currencies such as bitcoin and ether. The company claims that its user agreement requires disputes to be resolved by arbitration, and that, under a law called the Federal Arbitration Act, which governs the process of resolving disputes by arbitration, when a compulsion request is denied, the trial court action must stop. Arbitration is appealed.

Conservative Justice Brett Kavanaugh and four conservative colleagues co-authored the ruling.

Kavanaugh warned of the risk of allowing the trial court to proceed while the arbitration issue was on appeal, a situation he said could result in the benefits of arbitration, such as efficiencies and cost savings, being “irretrievably lost — even if the The appeals court later concluded that “the case had in fact been arbitrated all along. “

The court’s three liberal justices and conservative Justice Clarence Thomas dissented.

One such case involved a lawsuit filed in California by client Abraham Bielski, who claims scammers stole more than $30,000 from his Coinbase account in 2021. The suit alleges that the company violated the Electronic Funds Transfer Act by failing to investigate or re-credit Bielski’s account.

In a separate lawsuit dismissed by a court on Friday, former users accused the company of violating California’s false advertising laws by deceiving them into paying to enter a 2021 sweepstakes that offered prizes in dogecoin, a cryptocurrency.

In both cases, federal judges declined to force the claims to arbitration because the company argued it needed to abide by user agreements. While Coinbase immediately appealed those rulings, the San Francisco-based Ninth U.S. Circuit Court of Appeals in 2022 denied the company’s request to stay further litigation pending the appeal.