US Supreme Court halts Coinbase cases in its first crypto ruling

The United States Supreme Court decided in favor of cryptocurrency exchange Coinbase on June 23 in a partisan opinion that will halt court proceedings against the company in two California cases. 

Plaintiffs in the class-action lawsuits alleged Coinbase failed to provide proper relief after users lost money and that Coinbase allegedly engaged in deceptive advertising.

Coinbase asked the district courts overseeing the cases to dismiss them on the grounds that, per the company, users signed an agreement upon creating their accounts stating that such disputes would be handled through arbitration in lieu of lawsuits.

Per a court document shared by Courthouse News:

“The sole question here is whether the district court must stay its pre-trial and trial proceedings while the interlocutory appeal is ongoing. The answer is yes: The district court must stay its proceedings.”

This ruling marks the U.S. high court’s first cryptocurrency-related ruling. Justice Brett Kavanaugh wrote the opinion, which was supported by four of the court’s other conservative justices in a 5–4 vote.

California district courts will now kick both cases into arbitration, which is typically less costly for companies than arguing or settling cases through the courts.

While this represents a win for Coinbase, it could also have a ripple effect throughout the crypto industry.

As the court wrote in its opinion, “When creating a Coinbase account, individuals agree to the terms in Coinbase’s User Agreement. As relevant here, the User Agreement contains an arbitration provision, which directs that disputes arising under the agreement be resolved through binding arbitration.”

After California’s district courts denied Coinbase’s request for arbitration in the aforementioned cases, the company filed appeals requesting a stay while the appeals were handled, but the courts were inclined to continue the civil cases in spite of the company’s appeals.

The Supreme Court’s June 23 decision grants the stays and allows Coinbase’s appeals to go through before the class-action suits can continue. The court’s decision affords Coinbase the same legal treatment typically given to all companies under the U.S. Federal Arbitration Act of 1925.

It’s unclear at this time how similar cases against other cryptocurrency companies will be affected, and there’s no indication that this case will affect the Securities and Exchange Commission’s ongoing action against Coinbase.

Related: SEC sues Coinbase for breaking US securities rules

However, it is notable that the Supreme Court’s ruling essentially underpins the idea that existing laws can be seamlessly applied to cases involving the cryptocurrency industry.