- U.S. court denies Coinbase to force private arbitration on former users.
- Users claim they were “duped” by the rules in Coinbase’s Dogecoin contest.
- Judge halts the proceedings in the sweepstakes case after Coinbase appeal.
According to a ruling by the U.S. appeals court on Friday, Coinbase Global Inc (COIN.O) cannot require former users to use private arbitration instead of the courts to settle disputes related to the Dogecoin sweepstakes run by the crypto exchange.
Four former Coinbase consumers filed a lawsuit against the firm, alleging that they were tricked into paying $100 or more to enter a contest in June 2021 for a chance at winning prizes worth up to $1.2 million in Dogecoin.
To open an account, each user had to accept the terms of the company’s user agreement, which included a clause mandating that any disagreements be resolved through arbitration.
The ruling on Friday followed a week after the United States Supreme Court agreed to hear a procedural issue in that and another case, which Coinbase had unsuccessfully attempted to drive into arbitration.
Business organizations argue that arbitration is more efficient than legal action. Attorneys for the plaintiffs claim that arbitration benefits businesses and that consumers are better served in court.
However, a federal judge declined to order arbitration. The 9th U.S. Circuit Court of Appeals in San Francisco upheld that decision, citing a clause in the sweepstakes’ official rules mandating that disputes be resolved in California courts.
David Harris, the users’ attorney, expressed they were pleased with the court’s ruling. However, Coinbase opted not to respond to the situation.
Coinbase is appealing two cases to the Supreme Court after the 9th Circuit refused to suspend trial court proceedings while challenging judges’ orders not to push the lawsuits into arbitration.
Following Coinbase’s request for the Supreme Court to hear the issue, a judge decided to halt the proceedings in the sweepstakes case pending appeal.
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