The Supreme Court has agreed to take up the case of cryptocurrency exchange Coinbase, which is attempting to transfer lawsuits filed against it in the courts to arbitration panels.
Although many investors are unfamiliar with cryptocurrencies, which are famously volatile investments, they’ve been growing in popularity.
There are reportedly more than 19,000 different cryptocurrencies in circulation. A cryptocurrency can be defined as a digital currency that is secured by cryptography, which reportedly makes counterfeiting or double-spending almost impossible.
The crypto markets have been racked by controversy in recent weeks after the multi-billion-dollar collapse of the Bahamas-based crypto exchange FTX. Embattled founder Sam Bankman-Fried has reportedly agreed to testify about the saga before the U.S. House Financial Services Committee on Dec. 13.
The case at hand is Coinbase Inc. v. Bielski, court file 22-179.
The Supreme Court approved the petition for certiorari, or review, close to the end of the working day on Dec. 9 in an unsigned order. In accordance with their usual practice, the justices did not explain why they granted the petition.
San Francisco-based Coinbase operates one of the largest cryptocurrency exchange platforms in the United States, on which users can buy, sell, and transact in various digital currencies, including Bitcoin, Ether, and Dogecoin. To use the platform, an individual must first sign Coinbase’s user agreement and agree to submit “any dispute” to arbitration, according to the petition (pdf) filed with the Supreme Court.
In August, the Supreme Court refused emergency applications from Coinbase to stay two class-action lawsuits pending against the company, as The Epoch Times reported.
Companies often prefer arbitration to the courts, saying the process resolves cases with greater speed and reduced expense. Some consumer activists prefer the courts because in their view the judicial system provides consumers with more options and is less likely to side with the companies being sued.
In this case, aggrieved Coinbase users filed suit in court against Coinbase and the company went to court in an attempt to relocate the litigation to arbitration.
Coinbase user Abraham Bielski sued the company, claiming a criminal deceived him and drained upwards of $31,000 from his trading account. Bielski said the Electronic Funds Transfer Act requires Coinbase to cover stolen cryptocurrency.
Coinbase said it warned customers about this kind of scam in its user agreement, but Bielski said the company showed little interest in his plight after he sought redress for the fraud. The company argued that because Bielski signed the user agreement, which requires arbitration of disputes, he should have to proceed with arbitration.
U.S. District Judge William Alsup, an appointee of former President Bill Clinton, refused to send the litigation to arbitration, finding that the user agreement violated the general principles of contract law and could therefore not be enforced.
Coinbase appealed the ruling and sought to halt the lawsuit while the appeal was pending but the U.S. Court of Appeals for the 9th Circuit refused to intervene.
Coinbase attorney Neal Katyal told Reuters he was pleased with the high court’s decision in the case.
“We are gratified the Supreme Court agreed to hear our appeal, and we look forward to its resolution of this matter,” Katyal reportedly said.
David J. Harris Jr., attorney for other users in the appeal, provided a comment to The Epoch Times.
“We believe it is the right decision for the Supreme Court to take up this case,” Harris said by email.
“My clients and I look forward to addressing the question presented with the Court, and to hopefully achieving a positive result for plaintiffs in many types of civil cases across the country.”
The Epoch Times reached out for comment to Bielski’s attorney, Hassan Ali Zavareei, but had not received a reply as of press time.
The case is expected to be heard in the new year.