Arbitration
Coinbase Inc. v. Kramer
Date: Oct. 6, 2025
Issue: Whether the Federal Arbitration Act (FAA) preempts the “McGill” rule, a California rule that allows a plaintiff to evade arbitration by pleading a request for “public injunctive relief.”
Case Summary: The U.S. Supreme Court declined to examine Coinbase’s appeal seeking to clarify whether the FAA preempts the McGill rule, which allowed users to evade arbitration by pleading a request for “public injunctive relief.”
In a 2017 decision, McGill v. Citibank, N.A., the California Supreme Court held on public policy grounds that claims for “public injunctive relief” — relief that has “the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public” — cannot be waived by parties to private arbitration agreements and that the FAA does not preempt that rule.
Coinbase operates a cryptocurrency trading platform that requires users to accept a user agreement before creating an account. This agreement includes an arbitration clause that covers all disputes between users and Coinbase, along with a waiver of class and non-individualized relief, ensuring that only individual claims can be arbitrated.
In 2022, plaintiffs accepted Coinbase’s user agreement and later sued the company after third-party thieves allegedly stole cryptocurrency from their accounts. Plaintiffs alleged Coinbase falsely marketed its platform as secure, violating California law. Coinbase moved to compel arbitration, but the San Francisco Superior Court denied the motion, ruling that plaintiffs pursued public injunctive relief, which is not subject to arbitration.
The California Court of Appeals affirmed the trial court’s decision denying Coinbase’s motion to compel arbitration, ruling that the plaintiffs sought public injunctive relief under California’s consumer protection laws and that such claims cannot be forced into arbitration. Because the plaintiffs asked the court to stop Coinbase from continuing misleading practices, the court explained the injunction primarily protected the public rather than compensating individual users. Additionally, the court noted the California Supreme Court held in McGill that FAA preemption does not apply in such cases.
After the California Supreme Court refused review, Coinbase petitioned the U.S. Supreme Court to intervene. Coinbase argued that Supreme Court review was essential to resolve a deep, ongoing split. Federal courts in California have held that the FAA preempts state courts’ broad interpretation of the McGill rule, which bars parties from waiving claims for prospective injunctive relief against unlawful conduct. Coinbase also contended that this conflict between California’s state and federal courts has encouraged forum shopping, making Supreme Court intervention both necessary and timely.
Coinbase emphasized its petition differs from prior McGill-related filings because it directly confronts the divide between California’s expansive version of the McGill rule, the Ninth Circuit’s conclusion that the rule is largely preempted, and the California Court of Appeals’ decision that significantly widened the rule’s reach. ABA filed a coalition amicus brief supporting Coinbase’s certiorari petition, urging the U.S. Supreme Court to clarify the scope of FAA preemption when California plaintiffs seek public injunctive relief under the McGill rule. However, the Court declined to review the case and offered no additional comment.
Bottom Line: The U.S. Supreme Court’s refusal to hear the case leaves the conflict over California’s expansive McGill rule unresolved, allowing continued forum-shopping and uncertainty over the scope of FAA preemption.
Documents:
California Court of Appeals opinion
Petition
