The dispute at the heart of the case involves a Coinbase user who filed a lawsuit against the company, alleging that the exchange wrongfully closed his account and refused to return his funds.
The U.S. Supreme Court ruled in favor of cryptocurrency exchange Coinbase on June 23 in a dispute involving the enforcement of an arbitration clause, Reuters reported.
The court ordered a stay of proceedings in one pending customer lawsuit (Bielski v. Coinbase) while the exchange pursues its appeal. The second lawsuit was dismissed by the Supreme Court after review and will go to arbitration.
The ruling (by a 5-4 margin) solidified arbitration as a viable method of dispute resolution, with businesses often preferring arbitration to litigation.
It also overturned a previous lower court ruling that allowed both lawsuits to proceed even after Coinbase appealed the initial denial of its arbitration request.
An arbitration clause is an agreement between two parties that requires any disputes that arise between them to be resolved through arbitration rather than in court.
dispute
Abraham Bielski is suing Coinbase after a scammer allegedly stole $30,000 from his account in 2021. The lawsuit claims the company violated the Electronic Funds Transfer Act by not adequately investigating the case and by not reimbursing Bielski.
The second lawsuit, filed by a group of Coinbase users and dismissed by the Supreme Court, alleged that the exchange engaged in false advertising in a 2021 sweepstakes with Dogecoin as a prize.
Coinbase asked the lower court to compel arbitration in both cases based on its terms of service, which requires users to resolve issues through arbitration. The request was denied, prompting the company to appeal to the San Francisco Circuit Court of Appeals.
However, while the appeal is ongoing, the lower court did not stop considering the case, forcing Coinbase to turn to the Supreme Court.
Winning the arbitration
While the Supreme Court’s ruling is a victory for Coinbase and other businesses that rely on arbitration clauses, companies must ensure that their arbitration agreements are transparent and fair to all parties involved.
It is imperative for users of cryptocurrency platforms to read and understand the terms of service before using any platform that involves their hard-earned assets.
The Supreme Court’s decision in favor of Coinbase signals the recognition of arbitration as a legitimate method of dispute resolution and underscores the importance of transparent terms of service for businesses operating within the cryptocurrency industry.