The Supreme Court ruled unanimously Thursday in a legal battle involving Coinbase, reasoning that when users agree to arbitration — but in a separate contract are subject to a particular court jurisdiction — it’s up to judges to decide which agreement is valid and whether to send the legal conflict to arbitration or into trial.
The contractual conflict began when Coinbase users claimed the crypto exchange platform violated California law and didn’t protect against a loss in the crypto market.
The users had initially agreed to an arbitration agreement with the company, but when entering a sweepstakes, later agreed to be subject to a California court should a dispute arise.
Coinbase, meanwhile, sought to uphold the arbitration agreement over the sweepstakes one to avoid fighting the litigation in court, which is costly for businesses.
The justices decided it’s up to a court to decide which agreement is valid.
“Arbitration and delegation agreements are simply contracts, and, normally, if a party says that a contract is invalid, the court must address that argument before deciding the merits of the contract dispute. So too here,” wrote Justice Ketanji Brown Jackson for a unanimous court.
The legal battle stemmed from a couple of cases against Coinbase in the Northern District of California, where the court denied the company’s request to compel arbitration.
In one case, one user sued Coinbase after he fell for a scam, having given someone pretending to be a PayPal representative remote control of his computer and losing roughly $31,000 in cryptocurrency. He claims that Coinbase should reimburse him for the loss.
The second claim was brought by former users of the company claiming it violated California law when it held a Dogecoin sweepstakes in 2021. The users accuse Coinbase of tricking them into paying hundreds of dollars to enter the contest for a shot at up to $1.2 million in Dogecoin cryptocurrency. The sweepstakes agreement said disputes would be subject to lawsuits in California courts — federal or state.
All parties agreed to the User Agreement, which states that “any dispute” would be resolved through arbitration, according to court documents.
• Alex Swoyer can be reached at aswoyer@washingtontimes.com.