On Tuesday, the U.S. Supreme Court will hear arguments in its first-ever crypto-related case, as lawyers for San Francisco-based crypto exchange Coinbase attempt to convince the nine Justices to pause a pair of class-action lawsuits against the company.
Although the case involves crypto, it is not a crypto case. Instead, it concerns an esoteric, procedural argument over whether a lawsuit can proceed in federal court while one party – in this case, Coinbase – is attempting to send the dispute to arbitration.
Coinbase is appealing a federal court’s earlier decision that allowed two lawsuits, Bielski v. Coinbase and Suski v. Coinbase, to continue. The company’s user agreement requires disputes to be sent to arbitration, which is an out-of-court method of dispute resolution that often disadvantages consumers.
The U.S. District Court for the Northern District of California denied Coinbase’s motion to compel arbitration in the Bielski case last April, arguing the exchange’s arbitration clause as written is “unconscionable” and uses a “litigation gimmick” to disadvantage users in the case of a dispute.
When Coinbase appealed with the next-highest court, the San Francisco-based 9th U.S. Circuit Court of Appeals, in July, the decision was upheld.
Coinbase has been the subject of numerous class-action lawsuits, with judges allowing some to proceed while swatting down others. The suits have covered a range of issues, including allegations that the exchange sold unregistered securities and claims that it mishandled its public listing.
Other lawsuits have been tied to complaints about hacks and lax security, including one that alleged Coinbase broke the law in failing to reimburse a user for over $31,000 lost after being targeted by a scammer posing as a PayPal representative.
The other case the Supreme Court will review, Suski v. Coinbase, concerns a million-dollar sweepstakes event the exchange held in June 2021.
Suski and other customers say they were misled by advertising that suggested they needed to buy or sell $100 in dogecoin for a chance to win when in reality users who didn’t trade dogecoin were also eligible.
Coinbase has been forced to play a game of legal whack-a-mole as the lawsuits mount. If the exchange wins its appeal and future suits are forced into arbitration, it would make it easier for Coinbase to deal with them.
Although the decision will not set a precedent on the most important issues facing crypto, it could have a significant impact on the emerging litigation landscape in the crypto sphere. It would also have implications for other crypto companies that have increasingly been targeted by class-action lawsuits.
The court will convene in Washington, D.C., at 10:00 a.m. ET on Tuesday, with this case the second on the docket. Oral arguments are expected to last 60 minutes.