WASHINGTON — Justices seemed poised to remand Coinbase, Inc. v. Suski to the Ninth Circuit Court – a case related to a $1.2 million Dogecoin giveaway in 2021. The lawsuit originated from a claim that Coinbase – a cryptocurrency exchange platform – did not specify that a purchase was not required to enter the giveaway.
Liberal-leaning justices questioned the framing and scope of the case while conservative justices seemed more interested in the parties’ purpose for bringing the case to the Supreme Court and were eager to return it to the lower court.
“Can we just remand and say that’s for the Ninth Circuit to — to figure out in the first instance?” Kavanaugh said. “And if we do that, are we done?”
In 2021, to stimulate the purchase and sale of Dogecoin on its platform, Coinbase held a $1.2 million sweepstakes giving away the cryptocurrency to users. To enter the giveaway, users were led to believe that they had to “buy or sell $100 or more in DOGE on Coinbase.”
However, per the official rules of the sweepstakes, there was “no purchase necessary” to enter or win, with an alternative mail-in entry option being available. After being led to believe that they had to purchase Dogecoin to enter the giveaway, David Suski and three other users filed a lawsuit against Coinbase, Inc.
“If Coinbase’s digital ads had made clear to Plaintiff that there was a 100% free entry option, then Plaintiff would not have given Coinbase his $100, or paid Coinbase any commissions to acquire Dogecoins,” Suski’s initial putative lawsuit against Coinbase said.
After the suit was filed, Coinbase wanted the dispute to be resolved through a third party, citing an arbitration provision in the Coinbase user agreement. The official rules of the sweepstakes, however, stated that the California state and federal court system have “sole jurisdiction of any controversies” related to the giveaway.
Now, with these two contracts overlapping, the Supreme Court is deciding if the sweepstakes’ agreement affects the delegation clause in the Coinbase User Agreement.
“In this case, the Court is asked to resolve whether the effect of a second contract modifying the first has any impact on the delegation clause,” Jay E. Grenig said in an American Bar Association preview of the case.
The case was brought before the Supreme Court after the Ninth Circuit Court ruled in favor of Suski’s party in 2022. That case affirmed that the official rules of the sweepstakes hold greater effect than the Coinbase User Agreement because they apply to all entrants of the contest, “including entrants who are not subject to the User Agreement because they used an alternative mail-in procedure.”
In the briefing of the case, however, both parties agreed that the Ninth Circuit Court did not come to a proper ruling on the case. In the argument, Coinbase argued that the Ninth Circuit failed to apply the FAA’s severability framework and Suski’s party argued that the “existence and formation part of the Ninth Circuit’s analysis was wrong.”
Considering this, some justices, primarily Kavanaugh and Gorsuch, questioned why the case was brought to the Supreme Court in the first place.
“Why didn’t you just go to the arbitrator to get a quick answer?” Justice Gorsuch asked. “Why litigate it all the way to the Supreme Court of the United States?”
Liberal justices were more concerned with the scope of the case and how much deferring from delegation clause precedents may impact other arbitration agreements.
Judge Sotomayor was the most concerned about the impact of rule changes to delegation clauses. Coinbase’s party, however, claimed they were not asking “to create any federal rules.”
“These are huge changes,” Justice Sotomayer said. “You are now creating a whole set of federal rules on what constitutes a superseding agreement or not.”
Suski’s party is also seeking a putative class action lawsuit against Coinbase for damages related to the 2021 sweepstakes.
The Court will decide the case by June.
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