SCOTUS shuts down Coinbase fight to force arbitration over Dogecoin sweepstakes

WASHINGTON (CN) — The Supreme Court said on Thursday that a California court had correctly used its authority to resolve whether cryptocurrency giant Coinbase can force unhappy users into arbitration. 

Writing for the unanimous court, Justice Ketanji Brown Jackson said the dispute in question was over whether Coinbase’s users agreed to an arbitration agreement and if the issue must be resolved by a court, not an arbitrator. 

“We conclude that a court, not an arbitrator, must decide whether the parties’ first agreement was superseded by their second,” the Joe Biden appointee wrote. 

In 2021, Coinbase announced a sweepstakes campaign to promote Dogecoin’s debut on the platform. To enter, users had to buy or sell Dogecoins for $100 or more between June 3 and June 10, 2021. However, users could also enter the contest by mailing a handwritten card to the promoter.

Several Coinbase users who participated in the sweepstakes sued the company, claiming it had violated state laws by not adequately advertising the mail-in contest option. Coinbase attempted to force arbitration, citing its user agreement.

A lower court rejected Coinbase’s motion, however, finding that the user agreement did not give arbitrators authority over the dispute before the court. The court also found that the official rules of the sweepstakes superseded Coinbase’s user agreement, making the arbitration clause null and void. The Ninth Circuit affirmed.

Jackson said the court has long held that disputes can only be subject to arbitration when both sides agree to arbitrate. She said the court rejected Coinbase’s arguments because they were outside the scope of the question before the justices. 

“We took this case to decide whether, under the FAA, a court or an arbitrator decides which of the two contractual provisions controls,” Jackson wrote, referring to the Federal Arbitration Act. “We decline to consider auxiliary questions about whether the Ninth Circuit properly applied state law.”

Coinbase claimed that allowing courts to resolve these claims would invite chaos by facilitating challenges to delegation clauses. The court disagreed.

“We do not believe that such chaos will follow,” Jackson wrote. “In cases where parties have agreed to only one contract, and that contract contains an arbitration clause with a delegation provision, then, absent a successful challenge to the delegation provision, courts must send all arbitrability disputes to arbitration.”

Jackson said this case differed because there are two contracts in dispute and courts must decide which one should be followed. 

Following the ruling, Coinbase Chief Legal Officer Paul Grewal said the company was grateful for the court's consideration of the case even though the result was not in their favor.

"What a week," Grewal said in a statement. "Some you win. Some you lose. We are grateful for having had the opportunity to present our case to the court and appreciate the court's consideration of this matter."

Follow @KelseyReichmann

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