Tuesday will see the U.S. Supreme Court hear arguments in its first-ever case involving cryptocurrency, when counsel for San Francisco-based Coinbase will try to persuade the nine Justices to put a halt to two class-action lawsuits brought against the cryptocurrency exchange.
The top court will hear a case on Tuesday, although it is not specifically related to cryptocurrency. Nevertheless, this issue involves a rather specialized procedural debate over whether a lawsuit can go forward in federal court while one party—in this case, Coinbase—tries to have the matter arbitrated.
Contrary to its user agreement, which calls for disputes to be arbitrated, Coinbase is currently appealing a judgment from a federal court in California that allowed the two lawsuits, Bielski v. Coinbase and Suski v. Coinbase, to proceed. Arbitration is an alternative to litigation where the deck is frequently unjustly stacked against the consumer.
The exchange's arbitration clause, according to the U.S. District Court for the Northern District of California, is "unconscionable" and employs a "litigation gimmick" to disadvantage users in the event of a dispute. This argument was made in response to Coinbase's motion to compel arbitration in the Bielski case last April. The verdict was maintained when Coinbase filed an appeal with the next-highest court, the 9th U.S. Circuit Court of Appeals in San Francisco, in July.
Judges have thwarted some class-action lawsuits while allowing others to move forward, making Coinbase something of a magnet for these claims. The lawsuits have been filed on a variety of matters, including claims that the exchange botched its public listing and that it traded unregistered securities after the U.S. Securities and Exchange Commission declared some tokens to be securities.
Bielski's lawsuit claimed that Coinbase infringed the law by refusing to compensate him for the more over $31,000 he lost as a result of being targeted by a con artist acting as a PayPal representative. Other lawsuits have been connected to complaints about breaches and shoddy security, as well.
Suski v. Coinbase, the other case the Supreme Court will consider on Tuesday, is a $1 million prize that the exchange sponsored in June 2021. Suski and other clients claim advertising misled them into believing they had to buy or sell $100 in dogecoin to be eligible to win, while in fact everyone, regardless of whether they traded dogecoin, was.
Coinbase has been compelled to engage in an increasingly frenzied game of legal whack-a-mole as the lawsuits pile up. Future lawsuits may be compelled into arbitration if the exchange obtains the outcome it wants from the Supreme Court, which would make it simpler for Coinbase to handle them.
Although the final ruling won't establish a precedent for the most crucial crypto concerns, it may have a big impact on the developing legal environment surrounding cryptocurrencies. It would also have broad ramifications for other cryptocurrency businesses, which are increasingly the focus of class-action lawsuits.
This case will be the second on the docket when the court meets in Washington, D.C., Today, March 21, 2023 at 10:00 a.m. EST. Arguments in person should last 60 minutes.