Coinbase Gains Victory in Supreme Court Over Arbitration Lawsuit – Here’s What You Need to Know

The US Supreme Court has ruled in favor of Coinbase, backing its request to halt customer lawsuits while it pursues appeals aimed at moving the disputes out of courts and into private arbitration. 

On Friday, five of the nine Justices voted in support of Coinbase’s request, overturning a lower court’s ruling involving a user who sued after a scammer stole money from his account.

“The sole question here is whether the district court must stay its pre-trial and trial proceedings while the interlocutory appeal is ongoing. The answer is yes: The district court must stay its proceedings,” wrote Justice Brett Kavanaugh on behalf of the court.  

Coinbase is seeking to compel arbitration in response to a putative class action lawsuit filed against the exchange. 

While the ruling cannot be considered anything but a win for Coinbase, it doesn’t impact the cryptocurrency industry as a whole.

Nevertheless, it does mark the first time that a crypto company has argued before the US high court, which could have implications for other lawsuits filed against Coinbase. 

Businesses generally choose to arbitrate claims as it is a cheaper and faster process than going through litigation in court. Also, arbitrations can often be more comfortable to fight because there is less risk of significant damage.

Coinbase can continue trying to compel arbitration after Friday’s ruling.

“We anticipate that the Ninth Circuit here, as we anticipate in [appeals] more generally, will proceed with appropriate expedition when considering Coinbase’s interlocutory appeal from the denial of the motion to compel arbitration,” the ruling said. 

“We reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.”

What Are the Dismissed Cases Against Coinbase?

One of the dismissed lawsuits was brought by Abraham Bielski, a Californian customer of the exchange, who claimed that a scammer had stolen over $30,000 from his account last year, which Coinbase had failed to investigate or refund in violation of the Electronic Funds Transfer Act. 

The second dismissed case involved former users who accused the exchange of tricking them into paying to enter a 2021 sweepstakes that offered dogecoin prizes, and of violating California’s false advertising law. 

In both instances, Coinbase appealed earlier lower court decisions that had ruled against the exchange’s argument that the issues must be resolved through arbitration.

The good news for Coinbase comes as the exchange has been grappling with US regulators, particularly the US Securities and Exchange Commission, over the past couple of months. 

Just recently, the SEC filed a complaint against Coinbase, alleging that it operated its crypto asset trading platform as an unregistered national securities exchange and broker.

Following the SEC lawsuit, the largest US-based cryptocurrency exchange also received Show Cause orders from 11 US states, which requires Coinbase to justify why it shouldn’t cease operations in the states.