May 23, 2024 - Business

Supreme Court rules against Coinbase in dogecoin case, handing consumers a win

Illustration of a gavel hovering over the Coinbase logo.

Illustration: Aïda Amer/Axios

The U.S. Supreme Court on Thursday rejected an argument by Coinbase over a case involving the cryptocurrency exchange's 2021 dogecoin sweepstakes that prompted a lawsuit.

Why it matters: The ruling marks a new era for consumer protection across the business landscape, with the crypto case largely perceived as a bellwether, according to experts.

Zoom in: The conservative-led court upheld the Ninth Circuit court's in Coinbase, Inc. v. Suski, which denied Coinbase's motion to compel arbitration.

Flashback: Coinbase held a dogecoin sweepstakes with prizes valued at up to $1.2 million.

  • David Suski, and others who entered, sued the exchange and the sweepstakes management company. They alleged violations of California's False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act.
  • Coinbase sought to compel arbitration, via a clause found in its user agreement, but the district court interpreted the contractual documents to include the sweepstakes agreement.
  • On appeal, the Ninth Circuit affirmed that decision.

The big picture: The crux of the issue doesn't have anything to do with crypto per se, but relates to the Federal Arbitration Act.

  • For a century, that has protected businesses from the expense and risk of going to court to settle customer disputes.

The bottom line: The Supreme Court ruling isn't endorsing the Ninth Circuit's reasoning, but the justices agreed with the conclusion that "a court had to decide whether and to what extent the parties here reached an agreement."

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