On Thursday, the U.S. Supreme Court unanimously ruled against Coinbase Inc. (COIN) in an arbitration dispute stemming from the cryptocurrency exchange's 2021 Dogecoin (DOGE) sweepstakes.

The 9-0 decision clarified that when parties are governed by multiple contracts, a court must determine which legal agreement takes precedence.

Supreme Court Affirms Lower Court's Jurisdiction

Justice Jackson, writing for the court, stated, "The question of whether these parties agreed to arbitrate arbitrability can only be answered by determining which contract applies. When we focus on the conflict between the delegation clause in the first contract and the forum selection clause in the second, the issue is whether the parties agreed to arbitrate the dispute – and, as usual, that determination must be made by a court."

Coinbase had sought to resolve the dispute through arbitration, citing user agreements mandating arbitration for all customers. However, a federal judge ruled in November that the sweepstakes terms, specifying California's court system for related disputes, superseded the customer agreement.

The recent Supreme Court ruling affirmed that a lower court should determine which agreement governs this case. Justice Jackson also dismissed Coinbase's argument that ruling against them would create widespread legal confusion and allow parties to circumvent arbitration agreements. "We do not believe that such chaos will ensue," they wrote.

Richard Silberberg, an arbitration lawyer with Dorsey & Whitney, observed that the decision was "hardly surprising" given past rulings and confirmed that "a court, not an arbitrator, must decide whether the parties' initial agreement was replaced by the second."

He also noted that due to the case's limited scope, its applicability in future arbitration-related cases will be restricted.

Arbitration Dispute

Last year, Coinbase prevailed in a different arbitration-related case, supported by the court's conservative majority. In response to the latest ruling, Coinbase's Chief Legal Officer Paul Grewal commented, "Some you win. Some you lose. We are grateful for the opportunity to present our case to the court and appreciate its consideration of this matter."

The underlying lawsuit, brought by former Coinbase user David Suski, alleges that the exchange's "Trade Doge, Win Doge" contest misled participants by suggesting that a $100 purchase or sale of Dogecoin was necessary to qualify for cash prizes.

However, the contest's fine print revealed an alternative entry method via mail, circumventing the need for a purchase to comply with U.S. sweepstakes laws. Suski and other plaintiffs argue that they would not have spent $100 on DOGE had they known about this loophole.