Cryptocurrency exchange Coinbase is facing a challenge in the US court system, where Supreme Court judges appear divided on whether to stay legal actions brought by customers, including one who sued the company after having his money stolen by a scammer.
Coinbase seeks to transfer disputes to private arbitration rather than resolving them in court.
Magistrates considered Coinbase’s arguments in an appeal against lower court decisions that allowed class actions to proceed.
The company claims that these claims should be directed to arbitration. Companies generally prefer arbitration to lawsuits, as the first method is cheaper, faster and offers less risk of large damages.
During the discussions, some judges expressed doubts about Coinbase’s arguments, while others expressed concern about the consequences for defendants seeking to arbitrate customer claims.
Conservative Chief Justice John Roberts questioned Coinbase attorney Neal Katyal about why the company was not satisfied with the “enormous benefit” granted by Congress by allowing immediate appeals from a denial of arbitration, rather than waiting for a final judgment.
Liberal judge Elena Kagan told Katyal that the company gained a valuable benefit. Coinbase allows users to trade digital currencies like bitcoin and ether, and argues that its user agreement requires the resolution of disputes through arbitration.
Conservative Judge Brett Kavanaugh addressed the problem of defendants settling cases to avoid the burden of litigation and questioned the plaintiffs’ attorney, Hassan Zavareei.
Conservative Judge Neil Gorsuch also expressed concern that a case could be heard in two courts at the same time.
The cases at hand involve a California client who accused Coinbase of violating the Electronic Funds Transfer Act after he lost more than $30,000 in a potential hack in 2021.
In the second lawsuit, former users accused the company of violating California’s misleading advertising law by inducing them to pay to participate in a 2021 drawing that offered prizes in Dogecoin.
In both cases, federal judges declined to force the claims to arbitration, as argued by Coinbase. While the company immediately appealed those decisions, the US Court of Appeals for the 9th Circuit denied requests to stay pending litigation.