Reznik v. Coinbase Inc

Background

Edward Reznik alleged that, beginning March 6, 2023, an unknown scammer made multiple unauthorized transfers from his Coinbase account. He alleged losses totaling $50,395.19. Reznik claimed that he repeatedly notified Coinbase while the transfers continued, but Coinbase did not stop them and sent only automated emails. He brought claims under the Electronic Funds Transfer Act and sought damages and attorney’s fees.

Coinbase moved under the Federal Arbitration Act to compel Reznik to arbitrate his claims and to stay the court case during arbitration.

Agreement to Arbitrate

Reznik opened his Coinbase account in 2017 and accepted Coinbase’s User Agreement. He also accepted an updated agreement in February 2022 by clicking an “Accept terms” button after being shown the agreement in a scroll box. The 2022 User Agreement prominently warned that its arbitration provisions required most disputes between the user and Coinbase to be resolved through binding, final arbitration. The agreement also contained a delegation provision giving the arbitrator authority to decide questions about the arbitration agreement’s scope, enforceability, revocability, and validity.

The court applied California law under the agreement’s choice-of-law provision. It found no genuine factual dispute that Reznik had notice of the 2022 User Agreement and its arbitration provisions and had assented to them. It also found that Reznik’s claims—concerning unauthorized transfers and Coinbase’s communications about them—arose from or related to his access to or use of Coinbase’s services and therefore fell within the arbitration provision’s scope.

Unconscionability Argument

Reznik argued that the arbitration provision was “grossly unconscionable” because it allowed Coinbase to keep arbitration proceedings confidential, undermining transparency and accountability in consumer protection. Under California law, unconscionability generally requires both procedural unfairness, such as oppression or surprise, and substantively overly harsh or one-sided terms.

The court concluded that Reznik had not alleged or supported any procedural disadvantage or surprise. The court also found no basis to conclude that the provision was substantively unconscionable, either as applied to Reznik or as a matter of public policy. Because the court found a valid agreement to arbitrate, it also found the delegation provision valid and enforceable.

Ruling and Effect

The court granted Coinbase’s Motion to Compel Arbitration. It also stayed the action pending arbitration under the Federal Arbitration Act. The Clerk of Court was directed to terminate Docket No. 7. The parties must report to the court within seven days after arbitration concludes and, at that time, show cause why the case should not be dismissed. The opinion did not decide whether Coinbase violated the Electronic Funds Transfer Act; it required those claims to proceed in arbitration.