WASHINGTON (Reuters) – The U.S. Supreme Court has agreed to hear a dispute involving Coinbase’s attempt to transfer a legal dispute with users of the cryptocurrency exchange from the court system into private arbitration, a process often favored by businesses.
Coinbase has appealed a lower court’s decision, which found that the trading platform had effectively waived its right to arbitrate a dispute stemming from a 2021 sweepstakes that users alleged to be false advertising.
Typically, companies prefer arbitration over litigation because it is a quicker and more cost-effective process and carries a lower risk of substantial damages.
The crux of the case revolves around whether a judge or an arbitrator should determine which of two seemingly conflicting agreements should take precedence in the dispute between Coinbase and its disgruntled users. The choice between these contracts will ultimately decide whether the dispute proceeds through arbitration or litigation in court.
When users initially signed up for their Coinbase accounts, they agreed to resolve any disputes with the platform through arbitration. However, a subsequent agreement, related specifically to the sweepstakes, stipulated that disputes concerning the contest should be adjudicated in a California court.
After users accused Coinbase of violating California’s false advertising law by deceiving them into participating in a sweepstakes offering dogecoin prizes, they initiated a class action lawsuit in federal court.
A federal judge in California declined Coinbase’s request to transfer the dispute into arbitration, despite the company’s argument that the user agreements mandated it. The 9th U.S. Circuit Court of Appeals in San Francisco upheld the judge’s decision.
In a similar case in June, the Supreme Court ruled in favor of Coinbase with a 5-4 majority. In that instance, the justices supported the company’s efforts to halt customer lawsuits while it pursued appeals aimed at relocating the disputes from courts to private arbitration.
