The Crypto Space Is About To Become Litigation Nation, Warns Top Financial Expert Seth Taube

Photo courtesy: Sandy Point Holdings

American Crypto exchange Coinbase made headlines once again in late March when the U.S Supreme Court seemed to be divided over how the company should resolve customer disputes.

The highest court in the country listened to arguments presented by both sides in a hearing that will decide if multiple class action lawsuits against Coinbase will be allowed to continue.

Coinbase is asking the court to halt all customer lawsuits as it seeks to move all of these disputes to private arbitration. Coinbase has favored private arbitration in the past due to the benefits it affords companies.

With the court allowing class action lawsuits to continue, and a ruling not being expected until late June, the crypto market is holding its breath for what will be a defining moment in the crypto sector.

“Any ruling by the Supreme Court on this matter will have an unprecedented impact on the entire crypto space,” says financial expert and investor Seth Taube. “If crypto exchanges are not able to use private arbitration to settle disputes, we will be entering a stage of litigation, an expansion of ‘litigation nation’ for this industry, that we have never seen before.”

The innate volatility of cryptocurrency has caused hundreds of thousands of people to have their financial lives turned upside down, some for the better and others for the worse. By preventing crypto-related companies from using private arbitration, the U.S. judicial system could be opening the door to an unprecedented number of lawsuits against these companies. 

“The effects of such a move would be devastating for crypto companies,” says Taube. “Lawsuits are expensive. It will likely cause funding and innovation to slow dramatically. The continued lack of a clear regulatory framework makes things even worse, with regulators writing rules ex post facto and trying to legislate through regulation.”

This year is also expected to see the end of the SEC vs Ripple saga that has been going on since December 2020, which will also significantly impact the future of cryptocurrency regulation in the United States.

American regulators are not alone in failing to create a clear regulatory environment that cryptocurrency companies and developers can navigate within, as most countries around the world show a lack of clear decision-making in the regulation of this sector.

Decentralized finance (DeFi) has managed to thrive among crypto enthusiasts despite The U.S. Treasury Department considering it a “grave threat” to American security and with uncertainty remaining the law of the land in the regulation of the crypto space, 

“What we see now is a situation in which crypto projects can’t operate effectively, in any way. Despite creating a major transition in how financial and real assets can be managed globally, crypto seems to be at a crossroads,” concludes Seth Taube. “However, the seeds of innovation planted by the seminal Bitcoin whitepaper created by Satoshi will continue to flower. As innovators continue to create novel ways to decentralize control and ownership of financial and real assets, regulators will have to find common ground and provide the regulatory framework that protects investors while allowing innovation to flourish.”


This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This content contains sponsored advertising content and is for informational purposes only and not intended to be investing advice.

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