California district courts had denied Coinbase’s request for arbitration. The Supreme Court ruling grants Coinbase’s request for arbitration. It is the first time that the Supreme Court has ruled in favor of a cryptographic entity.
The United States Supreme Court has backed Coinbase in its attempt to take customer claims to a private arbitration process instead of litigation in traditional courts.
Indeed, Coinbase argued that its user agreement requires that disputes be resolved through arbitration and that the Federal Arbitration Act, which governs arbitration dispute resolution procedures, requires that action in lower court be stopped when denies a request.
A demand for arbitration, to give a clear idea, is a process for resolving legal disputes outside of traditional courts. In a demand for arbitration, the parties involved in the dispute agree to submit their dispute to an arbitrator or a panel of arbitrators, who act as a private judge.
In this process, the arbitrator listens to the arguments of both parties, reviews the evidence presented, and issues a decision that is binding on both parties.
In both cases, federal judges denied Coinbase’s request to take the claims to arbitration, arguing that user agreements were required.
Supreme Court Recognizes Legitimacy of Cryptocurrencies in the Coinbase Case
A tweet by Reuters on June 23 announced that the “US Supreme Court rules in favor of Coinbase in arbitration dispute.” Thus, the Supreme Court, in a five-to-four declaration, overturned a lower court’s ruling involving Abraham Bielski.
Judge Brett Kavanaugh warned against allowing trial courts to proceed while the issue of arbitration is resolved on appeal. Which could cause the benefits of arbitration to be irretrievably lost.
On the other hand, Judge Ketanji Brown Jackson in the dissenting opinion said the ruling created a new rule that perpetually favors the party seeking arbitration.
“Now, any defendant who devises a non-frivolous argument for arbitration can not only appeal but also pause the case. Which leaves plaintiffs to suffer damages, lose evidence, and exhaust their patience and funding in the meantime.”
Coinbase Push for Arbitration
Coinbase asked the district courts in charge of the cases to dismiss them as, according to the company, users agreed to arbitrate disputes rather than file lawsuits when they created their accounts.
The US Supreme Court ruling marks the first time that courts in the country have ruled in favor of cryptocurrencies. The ruling was written by Justice Brett Kavanaugh and was upheld by four of the court’s five other conservative justices in a 5-4 decision.
In its opinion, the court wrote the following:
“By creating a Coinbase account, individuals agree to the terms of the Coinbase User Agreement. As relevant here, the User Agreement contains an arbitration provision, which mandates that disputes arising under the agreement be resolved by binding arbitration.”
The two cases against Coinbase will now be referred to California district court arbitration, which is typically less expensive for companies than litigating or resolving disputes in court.
The Supreme Court ruling grants the delays in the proceedings, allowing Coinbase to continue with the appeals, before the class action lawsuits against it proceed.
This is not only good news for Coinbase, but also for the entire cryptocurrency sector, which is under fire from the SEC.
By Audy Castaneda
