The Ontario Superior Court of Justice recently grappled with the thorny issue of jurisdiction over cryptocurrency trading platforms in Shirodkar v. Coinbase Global, Inc., 2024 ONSC 1399.
The class action was commenced in the Ontario Superior Court of Justice and alleged that Coinbase Global Inc., Coinbase Inc., Coinbase Europe Limited, and Coinbase Canada Inc. (collectively, "Coinbase") had violated securities law in Ontario by distributing securities without complying with disclosure requirements.
In determining the issue of jurisdiction, the Court cited the Supreme Court of Canada decisions in Chevron Corp. v. Yaiguaje, 2015 SCC 42, which established that the defendant must have been carrying on business in the forum in question to establish jurisdiction, and Club Resorts Ltd. v. Van Breda, 2012 SCC 17, which held that carrying on business requires more than mere virtual presence.
While the Court stated that it was not required to grapple with the challenging questions of whether digital assets are securities and whether Coinbase was an issuer or dealer under the Securities Act, R.S.O. 1990, c. S.5, the Court held that the fact that cryptocurrencies were purchased by the plaintiff in Ontario was not sufficient to establish presence in Ontario for Coinbase Inc., Coinbase Europe Limited, or Coinbase Global Inc.
The Court concluded that there was no basis to assume jurisdiction over Coinbase Inc., Coinbase Europe Limited, or Coinbase Global Inc. as they were not carrying on business in Ontario and the only element of the alleged tort that occurred in Ontario was the Plaintiff's location when he accessed the Coinbase platform at certain times. Significantly, the Court stated at paragraph 117 that:
The plaintiff could have accessed the Coinbase Platform from wherever he happened to be on the planet as long as he had a wifi or data connection. I conclude that, viewed practically, it would not be reasonable for the defendants to expect that they would be called to answer proceedings in Ontario in the circumstances where almost every element of the alleged tort occurred outside Ontario and only a relatively minor element of the tort occurred in Ontario.
Had the Court concluded otherwise, cryptocurrency trading platforms would have been exposed to the prospect of litigation operating around the word, including Ontario. The Court articulated this concern as follows at paragraph 120:
If the plaintiff's choice to use his home computer in Ontario to conduct trades on the Coinbase Platform were sufficient to ground jurisdiction, every jurisdiction in the world where anyone purchased digital assets on the Coinbase Platform would also have jurisdiction. This universal jurisdiction is exactly what our court have cautioned against: Yip SCJ, at para. 213; Leon v. Volkswagen AG, 2018 ONSC 4265, at para. 35.
The Court concluded that while it did have jurisdiction over Coinbase Canada Inc, Ontario was not a convenient forum for the action. If the Plaintiff pursued the action against Coinbase Canada Inc., it ought to do so in conjunction with the claims against the remaining defendants to prevent the risk of conflicting decisions and to ensure judicial resources were used efficiently. The action against Coinbase Canada Inc. was stayed.
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