Two Lawyers Take On Arbitration Compelled For Coinbase After Being Sued For Failing To Prevent A Scam


Cryptocurrency scams are common in the cryptocurrency marketplace, and there is usually no recourse if someone falls victim to a scam unless the criminals are caught. However, there is an arbitration clause in Coinbase’s terms of service that one plaintiff is using to sue the platform, according to The Block.

According to the plaintiff, Coinbase,

“negligently failed to prevent a scam that allowed a third party to steal more than $200,000 from his account. Coinbase moved to compel arbitration pursuant to a mandatory arbitration clause in its user agreement.”

Signing up on the website, the plaintiff checked the boxes that typically appear on these kinds of websites – right next to “I certify that I am 18 years of age or older, and I agree to the User Agreement and Privacy Policy.” Links with the User Agreement and Privacy Policy.

The courts stated that by containing “explicit acceptance” as a requirement, it is a signal that the website would have to abide by those rules and,

“an even stronger prompt to a reasonably prudent user to click on the link to see what those terms and conditions were before agreeing.”

The plaintiff says that he did not remember clicking the box, but the website was clear enough that he must abide by and agree to the User Agreement.

Based on the design alone, the court sees that the company offers a simple design, since “[t]he account creation screen contains only five fields and two checkboxes,” which are all visible simultaneously. At this point, the case has resulted in compelling arbitration.

Explaining, The Block added,

“As a closing aside: whether arbitration is better or worse is a matter of opinion. In some cases, plaintiffs who have weaker arguments can actually do better in private arbitration. So, this is not necessarily a loss for the plaintiff in the long run. It … depends.”

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