On Tuesday, Coinbase (COIN) appeared before the U.S. Supreme Court with a landmark argument that disputes over forcing customers into arbitration should be put on hold while the arguments are being made— a major milestone for crypto with its first-ever high court appearance. While the case has little direct effect on the digital assets business, it could still prove significant for Coinbase and other crypto companies when encountering customer disputes. Specifically, the crypto exchange argued that if a court decides that a customer should settle a dispute in court instead of through arbitration as stated in their user agreement, then any appeals made by the company should prevent the case from moving forward until the appeal is resolved.
Congress granted a rare power to Coinbase, allowing them to appeal immediately if a court denies their request for arbitration. However, according to Neal Katyal, the lawyer representing Coinbase in this case, an existing “background rule” does not allow courts to continue in such cases. In addition, if customers are given access to exchange information and evidence, companies may be pressured into a large settlement due to potentially embarrassing details that could come to light, ultimately undermining the arbitration’s main purpose. Katyal said: That toothpaste can’t later be put back into the tube.”
On Tuesday, Coinbase Inc. v. Bielski was heard in court, with customer Abraham Bielski initially accusing the company of insufficient security measures, leading to a scammer stealing $31,000 from his account. Judge’s ruling allowed him to pursue the complaint in court. However, Coinbase then filed an appeal trying to halt proceedings. Hassan Zavareei, representing Bielski, argued that the purposeful and automatic delays by Coinbase could rob a person of their chance to pursue legal action if the business fails during this time. “The entire cryptocurrency market is collapsing under our feet,” he said, adding that plaintiffs may question whether Coinbase will still exist while awaiting an appeal decision.
Chief Justice John Roberts expressed that the appeal power granted to companies was a “huge benefit” as it allowed them to suspend proceedings until the case had concluded. However, Zavareei countered this by stating that Congress says what it means and means what it says, which seemed to be met with doubt from most of the justices. Justice Elena Kagan was particularly critical of the case, stating that the district court was not interfering with the appeals court. Justice Brett Kavanaugh praised Coinbase’s presentation on related statutes demonstrating congressional intent for this one. Overall, it seemed that most of the justices were unconvinced by Coinbase’s argument.
