Coinbase: Supreme Court takes on its first crypto case
Yahoo Finance’s Alexis Keenan joins the Live show to break down the latest surrounding Coinbase’s legal battle.
RACHELLE AKUFFO: All right, well, the Supreme Court is taking on its first crypto case, and it involves a major exchange, which is Coinbase. The justices will hear arguments stemming from Coinbase's efforts to push two lawsuits into arbitration. We have Yahoo Finance's Alexis Keenan here with the details. Alexis, what's the latest?
ALEXIS KEENAN: Hi, Rachelle. Yes, so the Supreme Court for the first time taking on a crypto related issue, and this issue that they're tackling today, it's a bit of an esoteric one. It's a legal issue involving legal procedure. But let's try to break it down here. This case, it stems from two different class action lawsuits that were brought against Coinbase. And the plaintiffs here, in both cases, they were able to sidestep Coinbase's user agreement. And what that user agreement says is important to a lot of users and a lot of plaintiffs that have tried to go after the company. It says that all disputes between users of the platform and the company must go to arbitration and therefore not into a court of law.
A California court, nonetheless, a federal court agreed to hear the disputes. And in response, not surprisingly, Coinbase then filed an immediate appeal asking for the appellate court to step in and stop these litigations from going forward while the appellate court would rule on this intermittent issue. So the question here is, can these cases keep going in these lower courts before the appellate court rules on whether or not they're going to kick it out of the justice system altogether?
Now, more broadly, though, if we step back, this case has some major implications not just for crypto companies, but also for tech companies and other companies that use these types of mandatory arbitration agreements. One, though, the mere fact that the court is taking up the case at all shows that perhaps they're willing to go in and take on some other cases involving cryptocurrency. We'll have to wait and see what the court does there.
But second, these user agreements that mandate arbitration for the people that use their platforms oftentimes for free, they're widely used by tech companies and often favor the companies over users. Users don't fare very well, as the statistics show. When they go up into arbitration, the numbers are overwhelmingly in favor of the companies. And so that has been a sticking point and a frustration for users who have, in the case of these plaintiffs, one of them lost $31,000 on the platform because of a scammer who hacked into his account.
The other one is alleging that the company ran an unfair scheme for a sweepstakes where they believed they had to buy Dogecoin in order to participate. But the broader implications here are absolutely that these lawsuits could become more expensive, these claims more expensive for these companies because, certainly, Coinbase and others don't want to spend their time and their dollars fighting in court when they have provided in their agreements that they would like these cases to go directly to arbitration, Rachelle.
RACHELLE AKUFFO: We'll certainly be keeping an eye on that, see if other companies end up changing some of their arbitration policies, depending on that outcome. Alexis Keenan there, thank you for that update.