Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Ontario Court Blocks Binance’s Pricey Arbitration Clause
Crypto Enforcement | Nov 7, 2024
Image: Freepik/rawpixel.com
Ontario Court Rejects Binance’s Costly Arbitration, Allows Class-Action in Ontario
The Ontario Court of Appeal supported a previous court ruling against Binance’s arbitration clause. This means a class-action lawsuit against Binance can proceed in Ontario instead of being forced into costly arbitration in Hong Kong. The decision is a significant outcome for consumer rights in the world of digital finance.
See: FINTRAC Fines Binance $6M CAD for Compliance Failures
Binance, a leading global cryptocurrency exchange, required users to agree to address disputes in Hong Kong through an arbitration process. To use the exchange users had to accept the clause which is estimated to cost about $37,000 CAD excluding travel or legal fees, an amount of money that would likely be far out of reach for most users. In 2022, a group of Canadian Binance users launched a class-action lawsuit arguing that Binance violated Ontario securities law by selling crypto derivatives without following regulatory rules. Binance tried to have the case stopped, referring to its Hong Kong arbitration clause which they argued took precedence.
Court's Ruling and Implications
The Ontario Superior Court of Justice originally blocked Binance’s attempt to enforce arbitration, finding the clause unfair and a violation of public policy. Due to the high cost, the arbitration process effectively prevented users from seeking compensation making the clause unreasonable. The Ontario Court of Appeal agreed, setting a clear stance that arbitration clauses that burden users with excessive costs won’t hold up in Ontario courts.
The ruling highlights the importance of using a fair and accessible dispute resolution mechanism in the crypto sector. Companies operating in Canada must ensure that their arbitration clauses do not create unreasonable barriers for unhappy users seeking to resolve disputes.
See: OSC Pursues Binance Investigation, Unfazed by Crypto Exchange’s Departure from Canada
The decision also shows the court's willingness to overrule arbitration agreements that are designed to go around consumer protection laws.
Conclusion
Canadian courts are unlikely to enforce arbitration agreements if they impose high costs that make it hard for users to seek justice. Crypto companies operating in Canada must ensure their dispute policies follow Canadian laws and protect consumer rights. This ruling could influence future cases about arbitration clauses in the crypto industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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