First Crypto Lawsuit Reaches U.S. Supreme Court

Coinbase looks to defend its right to arbitration in two cases

By
Kevin George
Kevin George
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Kevin George is a freelance crypto writer and editor for Investopedia. He holds a master's degree in finance and has extensive knowledge and experience in the area of trading, markets, and economics.
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Published March 21, 2023
Brian Armstrong, cofounder and CEO of Coinbase speaks onstage during 'Tales from the Crypto: What the Currency of the Future Means for You' at Vanity Fair's 6th Annual New Establishment Summit at Wallis Annenberg Center for the Performing Arts on October 23, 2019 in Beverly Hills, California.

Matt Winkelmeyer/Getty Images

The U.S. Supreme Court presided over its first crypto case this morning as Justices heard an appeal from Coinbase (COIN) to pause class action lawsuits.

Key Takeaways

  • The U.S. Supreme Court heard arguments in the Coinbase v. Bielski case.
  • The crypto exchange wants to take the dispute to arbitration.
  • Justices, including conservative Chief Justice John Roberts, were divided on the initial comments.

The hour-long oral arguments focused on San Francisco-based Coinbase's attempts to pause two class action lawsuits and bring them to arbitration. Justices were divided about the crypto exchange's case. 

Abraham Bielski claims Coinbase broke the law after it failed to reimburse him for $31,000 he lost to a scam involving a person falsely claiming to represent PayPal who he allowed into his Coinbase account. The Supreme Court will also hear arguments in the Suski v. Coinbase case, in which the exchange is accused of being misleading in its advertising of a Dogecoin sweepstakes event.

Although the case doesn't directly involve cryptocurrency technology, it is still a landmark for the sector, as it could have consequences for many crypto firms.

Last April, a court in the Northern District of California denied Coinbase's motion to seek arbitration, the preferred option stated in the company's user agreement. The court described the user agreement's arbitration clause as “unconscionable” and said it used a “litigation gimmick” to gain leverage over consumers.

That decision was upheld at the San Francisco-based 9th U.S. Circuit Court of Appeals in July, and Coinbase appealed to the nation's top court.

Reuters said that during the oral arguments, some justices had doubts about Coinbase's arguments, while others worried about the outcome for defendants who want to arbitrate customer claims.

Chief Justice John Roberts said Congress already offered a "huge benefit" in immediate appeals in the event of an arbitration denial. The arbitration option is said to favor the defendants and is typically easier for companies than taking a case to court. Coinbase could find itself at the center of many more court visits if the Supreme Court sides with Bielski.

Shares in Coinbase were 12% higher on the day as Bitcoin continued to trade above the $28,000 level.

Article Sources
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  1. Supreme Court. "Hearing List March 2023".

  2. Reuters. "U.S. Supreme Court Divided over Coinbase Case".

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