Blockchain
Coinbase’s U.S. Supreme Court loss leaves the company with a mixed record
The Supreme Court of the United States spoke out against Coinbase Inc. (COIN) in its dispute over which legal agreement should prevail when the parties have two separate contracts and the first of them requires arbitration, finding that the company’s case was “unconvincing” and that courts should resolve such issues when arise.
The issue was far removed from the company’s cryptocurrency business, but arbitration issues have become increasingly important in the tech industry overall. This particular case arose from a dispute over whether an arbitration clause in an initial contract should have controlled what happened in a subsequent contract tied to a Dogecoin (DOGE) prize competition the exchange held in 2021
“The question of whether these parties have agreed to arbitrate can only be resolved by determining which contract applies,” according to the opinion written Thursday by Judge Ketanji Brown Jackson. “When we deal with 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 submit the dispute in question to arbitration – and, as usual, this question a court must be answered.”
That wasn’t what Coinbase was hoping to hear. The company did not immediately respond to a request for comment on the ruling.
“Coinbase argues that our approach will wreak havoc by facilitating challenges to the delegation clauses,” Jackson wrote in the court opinion. “We don’t believe such chaos will follow.”
“Some win. Some lose,” said its chief legal officer, Paul Grewal a post about X. “We are grateful to have had the opportunity to present our case to the Court and appreciate the Court’s attention to this matter.”
Because the scenario outlined in this case is narrow and unusual, “it will have limited applicability in arbitration-related jurisprudence going forward,” said Richard Silberberg, an arbitration lawyer at Dorsey & Whitney and director of the New York International Arbitration Center. “The SCOTUS’s unanimous decision that a court, not an arbitrator, should decide whether the parties’ first agreement has been superseded by the second is not at all surprising,” he added, because previous rulings had pointed in that direction.
In conclusion, according to Rollo Baker, founding partner of Elsberg Baker & Maruri:
“The decision makes clear that where the parties have two agreements, one requiring arbitration and a subsequently executed agreement requiring court resolution, it is not ‘unequivocally’ clear that the parties intended arbitrability to be resolved in arbitration,” he said in an emailed statement.
While this case hasn’t been a centerpiece in the cryptocurrency world, the Supreme Court is expected to eventually resolve the industry’s legal battles with U.S. regulators, though it could take years before any of these cases are brought to the table. ‘High Court.
UPDATE (May 22, 2024, 5:50 PM UTC): Adds comment from Coinbase executive.