Coinbase has been granted a notable victory, as the US Supreme Court ruled in favor of its appeal regarding arbitration. On Friday, the apex court ruled that a federal court must stay proceedings in a lawsuit when a defendant’s appeal for arbitration is ongoing.
Coinbase filed the appeal earlier this year, after its “motion to compel arbitration” was denied by the US District Court for the Northern District of California. The exchange then moved to file an interlocutory appeal, seeking to have the District Court stay proceedings of a class action lawsuit pending the resolution of its appeal – which had also been denied at the US Court of Appeals for the Ninth Circuit.
Justice Brett Kavanaugh noted in the Supreme Court’s opinion: “When a federal district court denies a motion to compel arbitration, the losing party has a statutory right to an interlocutory appeal. 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.”
The class action lawsuit against Coinbase was filed by Abraham Bielski at the US District Court for the Northern District of California. In the suit, Bielski alleged that the crypto exchange “failed to replace funds fraudulently taken from the users’ accounts”. The Supreme Court noted in its ruling that Coinbase’s User Agreement provides for dispute resolution through binding arbitration, which informed the exchange’s move to file for arbitration – which was denied.
Coinbase Chief Legal Officer Paul Grewal tweeted in response to the verdict: “We are grateful to the Supreme Court for its careful review. Another example of why I believe in the American court system. The rule of law is sometime slow, and at times disappointing. But it remains our last, best hope in an imperfect democracy.”
Justice Ketanji Brown Jackson dissented, noting that “today’s majority invents a new stay rule perpetually favoring one class of litigants – defendants seeking arbitration”, and that the move could have “significant implications for federal litigation”.
Coinbase’s victory comes days after the US Securities and Exchange Commission (SEC) sued the exchange over allegations of violating securities laws.
