Leading US-based crypto exchange Coinbase is targeted in a class action lawsuit that alleges its arbitration policies are unenforceable.
In a recent court filing, a plaintiff alleges that Coinbase’s agreement to arbitrate under its terms of service is legally inadmissible because it strongly favors one party.
“Under California law, a contractual provision is unenforceable if it was ‘inadmissible at the time it was made.’ … [The plaintiff] does not dispute that he agreed to be bound by the Coinbase user agreement in force when creating his user account, nor that he relates to the dispute.
Instead, he argues that the arbitration agreement is inadmissible because it lacks even a modicum of bilaterality.
Under CA law, substantial unfairness relates to the fairness of the actual terms of an agreement and assesses whether they are too harsh or one-sided.
The plaintiff, who seeks to represent a group of people who found themselves in a similar situation, originally wanted to arbitrate after a scammer stole over $31,000 from his Coinbase account, but found Coinbase to be unresponsive and the unfair conditions, according to the court record.
Court documents show Coinbase decided to compel arbitration, but Judge William Alsup denied the motion, saying the “broader arbitration provision [is] unreasonable.”
Last month, Coinbase was hit with another class action lawsuit alleging it sold crypto assets as unregistered securities.
In this case, three people claim that since October 2019, the crypto exchange has been selling digital assets without registering them with the United States Securities and Exchange Commission.
The Securities Act of 1933 states that all securities or assets that can be traded between parties and on the open market must be registered with the SEC.
The litigation, which is still ongoing, argues that virtual assets sold by Coinbase can be determined as securities using the Howey Test, the standard methodology used to determine whether an asset is a security or not.
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Top Crypto Exchange Coinbase Hit With Class Action
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