Supreme Court to resolve Coinbase arbitration dispute with users in Dogecoin sweepstakes lawsuit

The U.S. Supreme Court announced Nov. 3 that it will review a contentious case involving cryptocurrency exchange Coinbase and a dispute with its users over a Dogecoin sweepstakes, Bloomberg News reported.

At the heart of the matter is Coinbase’s endeavor to shift the dispute with its users from the public court system into private arbitration, a route often favored by businesses for its cost-efficiency and expediency.

The Supreme Court will determine whether Coinbase can move the dispute with its users into arbitration.

Dogecoin lawsuit

The case revolves around Coinbase’s appeal to overturn a prior court ruling that had effectively deemed the platform had forfeited its right to seek arbitration in a legal dispute stemming from a 2021 sweepstakes, which users claimed was misleading advertising.

Businesses frequently prefer arbitration as it is a swifter and more economical process than traditional court litigation, which can be more challenging to navigate and carries a higher risk of substantial damages.

The big question in the case is whether a judge or an arbitrator should decide which of two conflicting agreements should be followed in the dispute between Coinbase and its upset users. The Supreme Court ruling will determine whether the disagreement goes to arbitration or court.

Upon creating their Coinbase accounts, users agreed to resolve disputes through arbitration. However, a subsequent agreement related to the sweepstakes stipulated that any issues related to the contest must be addressed in a California courtroom.

When users later accused Coinbase of violating California’s false advertising law by luring them into participating in a sweepstakes offering Dogecoin prizes, they brought a class-action lawsuit in federal court. The suit alleges that Coinbase misled users into paying to enter the sweepstakes, which they believed was a false advertising campaign.

Arbitration requests

A federal judge in California refused Coinbase’s request to shift the dispute to arbitration, contending that the user agreements required such a move. The decision was subsequently upheld by the San Francisco-based 9th U.S. Circuit Court of Appeals.

In a related dispute in June, the Supreme Court ruled 5-4 in favor of Coinbase. In that case, the justices supported Coinbase’s request to suspend customer lawsuits while it sought appeals to relocate the disputes from public courts to private arbitration.

The Supreme Court review of the case is a pivotal development for companies utilizing arbitration clauses, as it will undoubtedly have a significant impact on the formulation and enforcement of user agreements, especially in the ever-evolving realm of digital currency trading.

The ongoing legal dispute hasn’t hindered Coinbase’s efforts to expand its services, with the company introducing new trading options for its users, including crypto futures trading.

The Supreme Court’s decision to investigate this matter underscores its commitment to defining the boundaries between arbitration and traditional legal proceedings. It could set a precedent for similar cases in the future.