Supreme Court will hear Coinbase’s Dogecoin sweepstakes case

The Supreme Court of the United States (SCOTUS) has agreed to hear a case involving Coinbase’s million-dollar Dogecoin (DOGE) sweepstakes that ran around the time that Elon Musk was re-promoting the meme coin.

The case, Coinbase v. Suski, centers on “whether, where parties enter into an arbitration agreement with a delegation clause, an arbitrator or a court should decide whether that arbitration agreement is narrowed by a later contract that is silent as to arbitration and delegation.”

In other words, SCOTUS justices will decide whether Coinbase users’ case against the exchange will stay in arbitration or escalate to court.

Coinbase claims that user disputes over the Dogecoin sweepstakes must go to arbitration, as outlined in its user agreement. A federal appeals court ruled otherwise, saying that the sweepstakes rules clearly stated that Californian courts had jurisdiction in case of a dispute. The appeals court reasoned that state-level sweepstakes regulations (to use courts to resolve disagreements) overpowered the user agreement (to use arbitration).

SCOTUS added the case to its docket on June 30, 2023, and assigned it docket number 23-3. Coinbase had previously requested a 30-day extension to review the decision made by the appeals court. Without the additional time, it would have had to submit a writ of certiorari by May 24, 2023.

Now that SCOTUS will hear the case, Coinbase has plenty of time to prepare.

Coinbase’s sweepstakes promised $1.2M in Dogecoin

In 2021, Coinbase held a giveaway with prizes worth up to $1.2 million denominated in Dogecoin. The firm’s legal argument hinges on the fact that users were required to sign up for an account and signed off on an agreement before entering the giveaway. However, the other side of the dispute — led by David Suski — says the giveaway itself had its own set of rules that should have overridden the user agreement.

The user agreement requires users to file any disputes with a private arbitration firm. Private arbitration has been advertised as a faster and cheaper way to settle disputes. Its supporters also say that it is a way to settle disputes without having to “air the dirty laundry.”

Read more: Coinbase tells SEC it no longer thinks crypto is the future of finance

Detractors of arbitration say that corporations typically try to force disputes into arbitration because there is no way to appeal if one side thinks the arbitrator erred. Second, some experts have also expressed concerns that arbitrators favor “frequent fliers” – parties like some corporations that frequently pay for arbitration services. Third, critics say that corporations force arbitration on matters that should proceed through courts, such as labor disputes, as a way to limit the monetary settlements and judgements from powerful judges.

Still, arbitration has its place. Some parties prefer arbitration for reduced legal costs, fewer formalities, faster scheduling, or expertise in specialized topics.

In summary, Coinbase’s desire to use arbitration to resolve a Dogecoin sweepstakes complaint will be decided by justices of the Supreme Court of the United States. SCOTUS has added the case to its docket and will choose the proper venue for resolving the disagreement: arbitration or court.

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