A clash involving disgruntled
The justices on Tuesday hear arguments stemming from Coinbase’s efforts to push two lawsuits into arbitration. The joint case comes as higher-stakes fights work their way toward the court, shaping the rights of customers and companies alike in the fledgling industry.
“It’s just the tip of the tip of the iceberg on crypto-related litigation,” said
The explosive growth of the crypto market, coupled with the spate of recent bankruptcies and frauds, is creating a growing list of pressing legal questions.
The biggest issues stem from efforts by the Securities and Exchange Commission to classify cryptoassets as securities, putting them under the federal regulator’s purview. Although the SEC has
“Eventually, one of them is going to get up to the Supreme Court,” said Bloomberg Intelligence litigation analyst
Both sides are
Ripple Chief Executive Officer
Another issue could hit the high court as soon as the nine-month term that starts in October. A federal appeals court in Washington is expected to rule in the coming months on the SEC’s rejection of a proposed Bitcoin exchange-traded fund after approving a similar product based on Bitcoin futures.
The case centers on
The case before the Supreme Court Tuesday will be a procedural battle over arbitration, rather than a crypto-specific matter. At issue is whether a lawsuit can move forward in federal court while a company presses an appeal that would send the case to arbitration.
Coinbase, backed by business groups including the US Chamber of Commerce, contends that trial court proceedings should automatically stop when a party files a non-frivolous appeal seeking to compel arbitration. A federal appeals court refused to halt the lawsuits.
The company is battling claims by Abraham Bielski, who says Coinbase should compensate him for $31,000 he lost after he gave a scammer remote access to his account. In the other suit, the company is accused of holding a $1.2 million Dogecoin sweepstakes without adequately disclosing that entrants didn’t have to buy or sell the cryptocurrency.
Arbitration agreements are commonplace in the crypto industry, much as they are with other retail businesses that have large customer bases.
“Coinbase is no different than a lot of those other companies,” Stein said. “It just happens to be a crypto-related company.”
But the core crypto issues are on their way. In addition to the SEC, the Commodity Futures Trading Commission has said some cryptoassets like Bitcoin are commodities, which are currently regulated at the state level. The derivatives regulator has been pushing for Congress to pass legislation to give it federal oversight over those types of tokens.
Courts also will eventually have to decide how federal tax, money-laundering and antitrust laws apply to the industry. And judges may have to work through complex jurisdictional issues stemming from the decentralized nature of blockchains.
Comizio likened the crypto business to the broader financial-services industry a half-century ago.
“If you asked me back in 1970, and I knew what I know now, I’d say, ‘Yeah, new and emerging large industry, and it’s going to permeate the courts as these issues get flushed out,’” he said.
The case is Coinbase v. Bielski, 22-105.
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