24-6-2023 (SAN FRANCISCO) In a 5-4 majority ruling on Friday, the U.S. Supreme Court granted a reprieve to cryptocurrency exchange Coinbase, stating that a lawsuit filed by one of its users cannot proceed until Coinbase defends an appeal against a lower court ruling.
The ruling allows Coinbase to continue its efforts to compel arbitration against the putative class action lawsuit, effectively pausing the lawsuit’s progress through the federal court system. While this decision is a victory for Coinbase, its direct impact on the wider crypto industry is minimal.
Justice Brett Kavanaugh, speaking on behalf of the majority, stated, “The sole question here is whether the district court must stay its pre-trial and trial proceedings while the interlocutory appeal is ongoing. The answer is yes: The district court must stay its proceedings.”
Coinbase initially lost a motion to compel arbitration in the putative class action lawsuit when the U.S. District Court for the Northern District of California ruled against it. The exchange also lost an appeal of that ruling. The lawsuit was slated to proceed on certain merits of the case.
The Supreme Court’s ruling does not delve into crypto-specific issues beyond the involvement of Coinbase as one of the parties. However, it marks the first time a crypto company has argued before the highest court in the United States and could have implications for other lawsuits filed against the exchange.
Following Friday’s ruling, Coinbase can continue its efforts to compel arbitration.
“We anticipate that the Ninth Circuit here, as we anticipate in [appeals] more generally, will proceed with appropriate expedition when considering Coinbase’s interlocutory appeal from the denial of the motion to compel arbitration,” the ruling stated. “We reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.”
Justice Ketanji Brown Jackson dissented, with support from Justices Elena Kagan and Sonia Sotomayor (and Justice Clarence Thomas signing on to some sections). Jackson argued that allowing the case to proceed would enable a balanced consideration of all parties’ interests.
“The Court concludes for the first time that an interlocutory appeal about one matter (arbitrability) bars the district court from proceeding on another (the merits). That logic has such significant implications for federal litigation that the majority itself shies away from the Pandora’s box it may have opened,” Jackson wrote.
