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US Supreme Court loss to Coinbase leaves company with mixed track record
The US Supreme Court decided against Coinbase (COIN) in its dispute over which legal agreement should prevail when the parties are under two separate contracts and the first of them requires arbitration, concluding that the company’s case was “unpersuasive” and that courts need to resolve these issues when they arise.
The issue was far removed from the company’s cryptocurrency business, but arbitration issues have been increasingly important in the technology sector generally. This particular case arose due to a dispute over whether an arbitration clause in an initial contract should have controlled what happened in a subsequent contract linked to a Dogecoin. (DOGE) scholarship draw competition held in 2021
“The question of whether these parties agreed to arbitrability can only be answered by determining which contract applies,” according to Thursday’s opinion written by Judge Ketanji Brown Jackson. “When we look at the conflict between the delegation clause in the first contract and the forum selection clause in the second, the question is whether the parties have agreed to send the dispute in question to arbitration – and, as usual, that question must be answered by a court.”
This was not what Coinbase expected to hear. The company did not immediately respond to a request for comment on the decision.
“Coinbase asserts that our approach will provoke chaos by making it easier to challenge delegation provisions,” Jackson wrote in the court opinion. “We do not believe that such chaos will ensue.”
“Some you win. Some you lose,” said its legal director, Paul Grewal, in a post on X. “We are grateful to have had the opportunity to present our case to the Court and appreciate the Court’s consideration of this matter.”
Because the scenario described in this case is narrow and unusual, it “will have limited applicability in arbitration-related jurisprudence going forward,” said Richard Silberberg, an arbitration attorney at Dorsey & Whitney and director of the New York International Arbitration Center. “SCOTUS’s unanimous decision that a court, not an arbitrator, must decide whether the parties’ first agreement was superseded by the second was not surprising,” he added, because previous decisions have pointed in that direction.
In short, according to Rollo Baker, founding partner of Elsberg Baker & Maruri:
“The decision makes clear that when the parties have two agreements, one that requires arbitration and a later executed agreement that requires judicial resolution, it is not ‘unequivocally’ clear that the parties intended the arbitrability to be resolved in arbitration,” he said. in an emailed statement.
While this case is not at the heart of crypto, the Supreme Court is expected to eventually resolve the industry’s legal battles with US regulators, although it could take years for any of these cases to reach the high court.
UPDATE (May 22, 2024, 5:50 pm UTC): Adds comment from Coinbase executive.