Recent Ontario Court of Appeal decisions have underscored significant uncertainty surrounding the liability of cryptocurrency platforms, highlighting complexities financial advisors and investment professionals will have to navigate amid growing investor interest in crypto assets.
In Shirodkar v. Coinbase Global, Inc., 2025 ONCA 298, the Court dismissed a proposed class action against Coinbase, determining that Ontario lacked jurisdiction over the company’s international entities.
The appellant alleged Coinbase violated provincial securities laws by failing to comply with registration and disclosure requirements for security dealers. However, the Court concluded the non-Canadian Coinbase entities were outside Ontario’s jurisdiction. It deemed Ireland, where Coinbase Europe is domiciled, a more appropriate forum.
Although Coinbase Canada fell within Ontario’s jurisdiction, the Court stayed proceedings against it, finding insufficient connection between Coinbase Canada and the plaintiff’s transactions.
The decision turned on nuanced jurisdictional analysis. The appellant argued that while they entered a user agreement with Coinbase Canada, crypto trading is a unique context and Coinbase Canada was only one part of an “intertwined web of Coinbase entities.”
The Court emphasized the necessity of distinguishing entities within corporate groups and rejected the appellant’s claim that such interconnected operations conferred jurisdiction. Since Coinbase Canada had no direct involvement in the appellant’s transaction, and the relevant entities were not within the Court’s jurisdiction, it was appropriate to stay the action against Coinbase Canada. That effectively ended the lawsuit.
On the other hand
In contrast, an earlier decision in Lochan v. Binance Holdings Limited, 2024 ONCA 784, permitted a class action against Binance to proceed.
The Binance investor argued that the company failed to comply with Ontario Securities Commission requirements by offering cryptocurrency derivatives without registering or filing a prospectus. In response, Binance sought to stay the action in favour of arbitration — another form of jurisdictional argument.
However, the Court found that Binance’s arbitration clause, mandating costly arbitration in distant locales like Hong Kong, was unconscionable and against public policy. This led the Court to conclude that enforcing the arbitration clause would effectively immunize Binance from legitimate investor claims.
Binance has sought leave to appeal to the Supreme Court.
In both cases, investors sought to prosecute class actions against international cryptocurrency platforms alleging they failed to comply with Ontario securities law. In both cases investors were met with jurisdictional arguments.
However, the Court came to opposite conclusions. The conflicting outcomes of Coinbase and Binance highlight the complexities inherent in transacting with crypto platforms. These decisions underscore how differences in user agreements may be determinative. Aggressive arbitration clauses can be invalidated when they undermine investor protection. Yet jurisdictional boundaries remain significant obstacles, particularly given crypto platforms’ complex international structures.
For financial professionals advising clients interested in cryptocurrencies, these decisions serve as a stark reminder that legal uncertainties persist, particularly regarding investor protections and the enforceability of international user agreements.
Advisors must be aware of these evolving risks, remain vigilant of regulatory developments and ensure robust due diligence when considering making crypto asset investments or discussing them with clients.