A U.S. appeals court ruled on Friday that Coinbase Global Inc. can compel former clients to resolve disputes relating to a Dogecoin sweepstakes the cryptocurrency exchange operated through binding arbitration rather than through the courts.
Four former Coinbase users filed a lawsuit against the firm, alleging that it tricked customers into paying $100 or more to enter a contest in June 2021 with the possibility of winning prizes worth up to $1.2 million in Dogecoin.
To establish an account, each client had to accept the terms of the firm's user agreement, which contained a clause mandating users to arbitrate any conflicts.
The decision on Friday comes a week after the U.S. In that case in addition to another one that Coinbase attempted to compel arbitration for, the Supreme Court agreed to address a jurisdictional issue.
Business organizations claim that arbitration is more effective than legal action. Attorneys for the plaintiffs claim that arbitration benefits businesses and that individuals are best off in trial.
However, a federal judge rejected a request to force arbitration, and the 9th U.S. The Circuit Court of Appeals upheld that judgment, citing a clause in the standard guidelines of the sweepstakes that stipulates that legal issues must be resolved in California courts. According to David Harris, the users were delighted with the decision. Coinbase opted not to respond.
Following the 9th Circuit's refusal to halt trial court hearings while it challenged judges' orders to not compel the matters into arbitration, Coinbase is challenging not one but two incidents to the Supreme Court.
Abraham Bielski, the plaintiff in the other planned class action, said that after being duped into granting a fraudster entry to his Coinbase account, the con artist took over $31,000 from him.
Only after Coinbase requested that the Supreme Court consider the issue did a judge order the proceedings in the sweepstakes case to be immediately suspended on appeal.
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