Supreme Court appeals Coinbase crypto lawsuit

The Supreme Court on Friday agreed to hear an appeal from the major crypto exchange Coin basewhich is seeking to have two customer lawsuits against the company resolved by private arbitration, not by a federal court.

“We are pleased that the Supreme Court agreed to hear our appeal, and we look forward to its resolution of this matter,” a Coinbase spokesperson said.

The question the Supreme Court will address in Coinbase’s case relates to the highly technical question of whether a party to a lawsuit can be forced to continue to defend the case in a federal district court proceeding, even if it asks an appeals court to send the dispute to an arbitrator.

But the case may be the first taken by the Supreme Court involving a cryptocurrency company.

“It’s the first one that I’m aware of, for sure,” said Glenn Chappell, an attorney for Abraham Bielski, one of the Coinbase customers suing the company.

“It may well be the first,” he said.

He and Bielski’s other lawyers had opposed Coinbase’s request to have the Supreme Court hear the case.

“We do not believe that companies like Coinbase should be entitled to an automatic stay of litigation after a district court has already determined that their arbitration is illegal,” Chappell said.

But, he added, “We’re definitely still excited about the opportunity to speak on behalf of consumers on the matter.”

Bielski sued Coinbase after he was defrauded out of more than $31,000 from his account with the company by someone unrelated to Coinbase. His potential class action lawsuit alleges that the Electronic Funds Transfer Act requires Coinbase to credit customer accounts for stolen cryptocurrency.

Coinbase tried to force arbitration. But a federal district judge in California ruled that the arbitration agreement Bielski had with the company was not valid under state law, allowing his case to proceed in district court.

In the second lawsuit taken up by the Supreme Court on Friday, Coinbase customers sued the company in California district court, claiming that Coinbase’s promotion of a Dogecoin contest in June 2021 violates state law.

As in Bielski’s case, a district judge denied Coinbase’s request to send the competition-related case to arbitration.

In both cases, the US Circuit Court of Appeals for the Ninth Circuit rejected Coinbase’s request to put the lawsuits on hold at the district court level as the company pursued appeals seeking to overturn the rulings denying arbitration.

Neal Katyal, a lawyer representing Coinbase at the Supreme Court, said in his petition asking the justices to hear the company’s appeal that there is a deep split among lower federal appeals courts on the question the court will decide.

Six federal appellate circuits have held that an appeal of a denial of a motion to compel arbitration “automatically” stays proceedings in a district court, Katyal wrote.

But, “Three circuits … have held to the contrary,” he added. “The circuits will remain divided unless this Court intervenes.”

“Coinbase must now devote significant time, energy and resources to burdensome putative class actions in two district courts, even though the Ninth Circuit is likely to conclude that neither case belongs in federal court to begin with,” Katyal wrote.