On Friday, the U.S. Supreme Court granted Coinbase Global Inc's demand to suspend customer lawsuits while their appeals to move the disputes away from courtrooms and into private arbitration were being heard. The 5-4 ruling reversed an earlier decision from a lower court concerning a case where a user was suing after losing money to a scammer. The justices also declined to review a separate lawsuit.
Businesses generally prefer arbitration of claims since it tends to be cheaper and faster than litigation, and lessens the risk of large damages awards. Coinbase's digital currency exchange allows users to deal in bitcoin and ether, and the company asserts that their user agreement stipulates that disputes must be settled through arbitration. The Federal Arbitration Act states that action in court must be suspended when a rejection of a request to compel arbitration is being contested.
Conservative Justice Brett Kavanaugh wrote that continued proceedings in trial court could cancel out the benefits of arbitration, such as efficiency and reduced cost, “even if the court of appeals later concluded that the case actually had belonged in arbitration all along.” The three liberal justices and Justice Clarence Thomas dissented.
The first case was brought on by California customer Abraham Bielski, whose Coinbase account was allegedly robbed of over $30,000 in 2021. Bielski accused Coinbase of violating the Electronic Funds Transfer Act by failing to investigate the theft or restore the funds to his account. The second case was filed by former users accusing Coinbase of deceiving them into participating in a sweepstakes offering dogecoin prizes in 2021.
Federal judges in both cases refused to force the claims into arbitration, and Coinbase immediately filed appeals. Nevertheless, the San Francisco-based 9th U.S. Circuit Court of Appeals refused to pause further litigation pending the appeals.
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