The U.S. Supreme Court has agreed to review a dispute involving cryptocurrency exchange Coinbase's attempt to shift a disagreement with its users from the courts to private arbitration, a route often favored by businesses over litigation. Coinbase is appealing a lower court's decision that the trading platform essentially waived its right to arbitrate a dispute arising from a 2021 sweepstakes, which users later claimed was false advertising.
Arbitration is a preferred choice for companies due to its cost-effectiveness and quicker resolution compared to court litigation, which is often more challenging and carries the risk of substantial damages. The crux of the matter lies in determining whether a judge or an arbitrator has the authority to decide which of the two seemingly conflicting agreements takes precedence in the Coinbase-user dispute. This decision would subsequently dictate whether the dispute proceeds through arbitration or in a courtroom.
Users, upon creating Coinbase accounts, initially agreed to resolve disputes through arbitration. However, a subsequent agreement related to the sweepstakes specified that disputes over the contest should be adjudicated in a California court. When users accused Coinbase of violating California's false advertising law by deceiving them into paying for participation in a sweepstakes offering prizes in dogecoin, they filed a class-action suit in federal court.
Despite Coinbase's argument that the user agreements mandated arbitration, a federal judge in California and the 9th U.S. Circuit Court of Appeals in San Francisco upheld the decision to keep the dispute out of arbitration. In a similar case in June, the Supreme Court ruled 5-4 in favor of Coinbase, supporting the company's efforts to pause customer lawsuits while pursuing appeals to move disputes from courts to private arbitration.
