In a recent turn of events, the United States Supreme Court has opted to take up a lawsuit tied to a Dogecoin sweepstakes involving cryptocurrency exchange Coinbase and its users. This decision comes nearly a year after the US District Court for the Northern District of California denied Coinbase’s initial motion to compel the class-action lawsuit into arbitration.
The class action, initiated in 2021, alleges that Coinbase intentionally obscured the fact that participants in its “Trade Doge, Win Doge” giveaway could enter without the obligation to trade $100 worth of Dogecoin on its platform. The largest US-based crypto exchange faced accusations of concealing a no-cost mail-in entry option to boost Dogecoin’s trading volume and liquidity upon its new listing.
Coinbase’s attempt to shift the case out of court and into private arbitration was based on an arbitration clause within its user sign-up agreement. However, the federal judge ruled that the sweepstakes agreement, which favored court litigation as the dispute resolution method, held precedence over the sign-up contract.
On November 3, with the backing of the 9th U.S. Circuit Court of Appeals, a federal judge in California upheld the decision that the sweepstakes agreement, mandating a traditional courtroom resolution, should be upheld.
The class action is led by David Suski, a Coinbase user, who contends that he would not have paid $100 to enter the Dogecoin giveaway had Coinbase transparently disclosed the free entry option. The lawsuit seeks over $5 million in damages for participants who paid the entry fee.
David J. Harris, Suski’s Counsel, expressed hope in a statement that the court would hold Coinbase accountable to the plain language of its contracts with consumers.
The Supreme Court’s decision to review this case is pivotal in the realm of cryptocurrency law, especially given that large corporations often favor arbitration for its cost-effectiveness and timeliness compared to court litigation.
Coinbase is also embroiled in a significant legal dispute with the United States Securities and Exchange Commission (SEC) over alleged securities law violations. The financial regulator charged Coinbase in June for conducting an unregistered offering of certain crypto assets categorized as securities. In its latest legal move, Coinbase argues that the SEC’s definition of securities is overly broad, seeking the dismissal of the regulator’s lawsuit.