A pivotal legal case concerning how crypto platforms settle disputes with their users is now headed to the United States Supreme Court. The court 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.
The Scope of the Case
The case addresses the question of whether an arbitrator or a court should decide if an arbitration agreement is narrowed by a later contract that is silent on arbitration and delegation when parties enter into an arbitration agreement with a delegation clause.
Arbitration, which involves the appointment of a neutral third party to privately settle a dispute, is often preferred by companies as it provides a cheaper and faster process compared to court litigation.
The Lawsuit Against Coinbase
In 2021, David Suski and other plaintiffs filed a class-action lawsuit against Coinbase on behalf of customers who had purchased or traded DOGE on the exchange in amounts exceeding $100 during the sweepstakes period between June 3, 2021, and June 10, 2021.
The lawsuit alleged that Coinbase had concealed the fact that customers could enter the sweepstakes for free via mail-in entry, without having 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,”
Hiding the free entry method allowed Coinbase to incentivize more DOGE trading volume, thereby driving further profits, as argued in the complaint.
However, things became complicated when a federal judge in California denied Coinbase’s request for arbitration in December. While Coinbase’s user agreement stipulates that any customer disputes should be resolved through arbitration, a subsequent agreement specific to the sweepstakes stated that disputes related to 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,” said David J. Harris Jr., counsel for David Suski, on the matter.
Notably, in June, the Supreme Court voted 5-4 in favor of Coinbase to halt all court cases against the exchange and move them into arbitration, based on the company’s arbitration clause. The vote aligned along partisan lines, with conservatives voting in favor.
