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US Supreme Court on Friday upheld crypto exchanges Coinbase Global IncTheir efforts to prevent customer lawsuits while pursuing appeals aim to move disputes out of court and into private arbitration, which businesses often prefer to litigation.
The judges, in a 5-4 decision, reversed a lower court ruling regarding a user who sued after a scammer stole money from his account. The lower court let a proposed class action proceed while Coinbase filed its appeal arguing that the claims were up to arbitration. The judges dismissed the second case Coinbase had asked them to review.
Companies often prefer to arbitrate claims because the process is cheaper and faster than litigation in court, which can be harder to fight and carries a higher risk of heavy damages judgments. masonry.
Coinbase’s exchange allows users to trade in digital currencies like bitcoin and ether. The company asserts that its user agreement requires that disputes be resolved through arbitration and under a law called the Federal Arbitration Act, which governs arbitration procedures. , action in the courts of first instance must cease upon the denial of an appealed request for arbitration.
Conservative Justice Brett Kavanaugh, along with four other conservatives, wrote the ruling.
Kavanaugh warned of the risk of allowing the trial courts to proceed while the arbitration question took place on appeal, saying such a scenario could expose arbitration benefits such as efficiency and cost savings. was “irreparably lost – even if the appeals court later concluded that the case had indeed long since belonged to the arbitration.”
The court’s three liberal justices and Conservative Justice Clarence Thomas disagreed.
One of the cases involved a lawsuit in California by customer Abraham Bielski, who alleged that a scammer stole more than $30,000 from his Coinbase account in 2021. The lawsuit alleges the public company violated the Electronic Funds Transfer Act by failing to investigate or credit Bielski’s account.
In another lawsuit that a court dismissed on Friday, former users accused the company of violating California’s false advertising laws by tricking them into paying to enter a 2021 sweepstakes with prize in dogecoin, a cryptocurrency.
In both cases, federal judges refused to take the claims to arbitration, as the company argued that user agreements were mandatory. Although Coinbase immediately appealed those decisions, the U.S. 9th Circuit Court of Appeals based in San Francisco in 2022 denied the company’s request to suspend litigation pending the decision. those appeals.
