In a 5-4 decision, the U.S. Supreme Court granted crypto exchange Coinbase‘s request to pause customer lawsuits while it pursues appeals to transfer the disputes from court to private arbitration. The ruling overturned a lower court’s decision, which had allowed a proposed class action lawsuit to proceed while Coinbase appealed, arguing that the claims should be resolved through arbitration.
Companies generally favor arbitration over litigation in court due to its cost-effectiveness, efficiency, and reduced risk of substantial damages. Coinbase contends that its user agreement mandates arbitration for dispute resolution, and according to the Federal Arbitration Act, which governs arbitration proceedings, trial court proceedings must be suspended when a request for arbitration is being appealed.
Justice Brett Kavanaugh, a conservative member of the Court, cautioned against allowing trial courts to proceed while the arbitration issue remains unresolved on appeal. He expressed concerns that such a scenario could result in the loss of arbitration’s benefits, including efficiency and cost savings, even if the appellate court eventually determines that the case should have been arbitrated from the beginning.
The dissenting opinion came from the Court’s three liberal justices and conservative Justice Clarence Thomas. One of the cases in question involves a lawsuit filed in California by Coinbase customer Abraham Bielski (COINBASE, INC. v. BIELSKI). He alleged that a scammer had stolen over $30,000 from his Coinbase account in 2021. The lawsuit accused Coinbase of violating the Electronic Funds Transfer Act by failing to investigate or reimburse Bielski’s account.
