Coinbase (COIN) made its debut in the U.S. Supreme Court on Tuesday to argue that its disputes over forcing customers into arbitration should be put on hold while the arguments are being made – a landmark moment for the crypto industry as it makes its first high court appearance.
This case itself has minimal direct impact on the crypto business, but the outcome could be important for Coinbase and other digital asset companies that have clashes with their clients. The crypto exchange essentially asked the justices to agree that if a court rules that a customer is allowed to settle a dispute in court rather than through arbitration as stipulated in their user agreement, the company should be able to appeal the decision and freeze the litigation until the appeal is decided.
“Congress has done something out of the ordinary” by granting the right to immediately appeal when a court denies a forced arbitration, said Neal Katyal, a lawyer representing Coinbase, who argued that the law does not permit courts to keep going if it is employed. If the customers get to move on to the phase where evidence and information is exchanged, a company could be “coerced into a huge settlement” as private details are revealed to the public – sometimes via the media – thus defeating the point of arbitration.
“That toothpaste cannot be put back in the tube,” he said.
The case in question is Coinbase Inc. v. Bielski, in which customer Abraham Bielski had initially accused Coinbase of insufficient safety measures when a fraudster stole $31,000 from his account. A court determined that he could pursue his claims in court, which Coinbase then appealed. When the case kept progressing in court, the company argued that its appeal should have put a stop to it.
“The entire crypto marketplace is crumbling beneath our feet,” commented Hassan Zavareei, who was representing Bielski, asserting that intentional and automatic delays on the part of a company could take away a person’s opportunity to take action against the company if it fails during the waiting period. A plaintiff might “question whether Coinbase will still be around” while awaiting the appeal.
In response to Coinbase’s argument that Congress meant for the automatic “stay” – a legal delay – he said that there is no such evidence. “Congress says what it means and means what it says,” Zavareei said.
Chief Justice John Roberts noted that this appeal power offered companies a “huge advantage” in that they don’t have to wait until the case is finished. “This is what they granted you,” he said. “Why is that not enough?”
The majority of justices asked Coinbase’s lawyer a lot of tough questions, frequently cutting him off. Justice Elena Kagan was particularly critical. In the Coinbase case, she said, “This district court is not overriding the appeals court,” adding that “the two can go their own way.”
Justice Brett Kavanaugh praised the Coinbase case at one point for making a “strong point” about applicable statutes that demonstrate congressional intention for this one.
