Supreme Court Justices seemed poised Wednesday to remand a case to an appeals court related to Coinbase Inc.'s $1.2 million Dogecoin giveaway in 2021 Photo by Aidan Johnstone/Medill News Service
WASHINGTON, Feb. 28 (UPI) -- Supreme Court justices seemed poised Wednesday to remand a case to an appeals court related to Coinbase Inc.'s $1.2 million Dogecoin giveaway in 2021 in which the 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 they were eager to return it to the lower court.
"Can we just remand and say that's for the 9th Circuit [Court of Appeals] to figure out in the first instance?" Justice Brett Kavanaugh asked. "And if we do that, are we done?"
To stimulate the purchase and sale of Dogecoin on its platform, Coinbase announced the 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, according to sweepstakes official rules, there was "no purchase necessary" to enter or win, with an alternative mail-in entry option 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.
"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 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 was asked to decide 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 lower court ruled in favor of Suski and the others 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 9th Circuit did not come to a proper ruling on the case. In the argument, Coinbase argued that the court failed to apply the FAA's severability framework and Suski's side argued that the "existence and formation part of the 9th Circuit's analysis was wrong."
Considering this, some justices, primarily Kavanaugh and Neil 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?" 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.
Justice Sonia Sotomayor was the most concerned about the effect of rule changes to delegation clauses.
"These are huge changes," Sotomayor said. "You are now creating a whole set of federal rules on what constitutes a superseding agreement or not."
Suski's side also is seeking a putative class action lawsuit against Coinbase for damages related to the 2021 sweepstakes.
The court is likely to decide the case by June.
