Speculative Loss

The UK Supreme Court has stood firm in not allowing counterfactual crypto-market outcomes or speculative price-formation scenarios to be used as a basis to measure and assign crypto trading platform liability under UK competition law. This position follows the refusal of permission to appeal through the UK appellate structure, with the effect that the Competition Appeal Tribunal’s (the “Tribunal”) judgment remains the operative determination.

This $13 billion claim before the Tribunal was a collective proceedings order filed by UK-based holders (the “BSV Holders”) of the cryptocurrency Bitcoin Satoshi Vision (“BSV”) through BSV Claims Limited against cryptocurrency exchange operators (the “Defendants”). The claim is predominantly based on alleged infringements of competition law, more specifically, agreements restricting competition within the internal market. The underlying facts predate Brexit and are said to have given rise to losses incurred by BSV Holders and to have constrained BSV’s market development.

The claim seeks damages for alleged infringement and was quantified by expert evidence by reference to distinct categories of loss corresponding to different claimant sub-classes:

1. The immediate and persistent effect: arising from the fall in price of BSV in the immediate aftermath of the delisting events. Sub-Class A comprises BSV holders who sold or traded their holdings shortly after delisting and whose alleged loss is confined to the immediate price impact. Damages were proposed to be calculated through a comparison of the value of BSV immediately before and after delisting, with reference to comparator cryptocurrencies emerging from Bitcoin hard forks; and
2. The forgone growth effect: the growth that is claimed to have been reasonably expected had BSV developed into a “top-tier cryptocurrency”. Sub-Class B consists of BSV holders who retained their holdings post-delisting and are said to have suffered loss through the suppression of long-term growth. Sub-Class C overlaps with this analysis insofar as it relates to BSV holdings on Binance’s platform, for which similar forgone growth arguments are advanced.

Binance Europe Services Limited (“Binance”) was the only defendant to take an active role in opposing the proceedings. In its application, Binance did not advance a substantive defence on the merits but instead sought to strike out or summarily dismiss the claim in its entirety, without a full trial, on two principal grounds:

• The market mitigation rule: Binance contended that losses attributed to the forgone growth effect were not recoverable as a matter of law. This argument was premised on the notion that the mere possibility of future market growth does not crystallise into a legally protected interest. Rather, such potential forms part of the inherent volatility and risk assumed by crypto investors, particularly where they retain the ability to mitigate losses by exiting the asset or acquiring a substitute cryptocurrency; and

• The loss of chance doctrine: while courts have recognised that the destruction of a genuine opportunity may give rise to recoverable loss, Binance argued that this doctrine cannot apply where the alleged “chance” is framed as the hypothetical long-term success of a cryptocurrency in a highly speculative market.

In determining whether to strike out a claim, the Tribunal ought to consider whether it has a realistic prospect of success, assessed on a prima facie basis and without resolving disputed facts. The Tribunal reiterated that, in developing areas such as crypto-asset litigation and competition law, strike-out is generally inappropriate where novel legal and economic questions may properly be developed at trial.

When assessing the market mitigation argument, the Tribunal emphasised that the rule presupposes an obligation on the injured party to take reasonable steps to mitigate loss. In market-based cases, this may involve switching to a reasonably substitutable product. Accordingly, a central issue is the availability of an appropriate substitute for BSV following delisting. Where such a substitute exists, recoverable loss is ordinarily confined to the cost of entering that substitute transaction, rather than speculative future gains foregone.

The Tribunal accepted that, if applicable, the market mitigation rule would operate equally against a claim framed on a loss-of-chance basis. Crucially, however, it rejected Binance’s contention that this justified striking out or summarily dismissing the claims advanced by Sub-Class B at the certification stage. The applicability of market mitigation was characterised as a fact-sensitive issue requiring trial-level evidence, particularly regarding the extent to which BSV holders were aware of delisting and able reasonably to mitigate. As such, unresolved mitigation questions did not, of themselves, justify dismissing the alternative loss of chance pleading at this stage.

Nonetheless, the Tribunal concluded that the loss of chance doctrine was not applicable as a matter of legal principle. The essence of Sub-Class B’s claim was that, absent the alleged infringement, BSV would have increased in value by developing into a top-tier cryptocurrency. This claim did not turn on the contingent decisions of identifiable third parties, but on a broader counterfactual assessment of long-term crypto-market evolution. The Tribunal held that such a causation issue was capable of determination on the balance of probabilities, taking into account BSV’s technical features, post-delisting events, and wider market characteristics.

While acknowledging that damages assessments in crypto markets inevitably involve uncertainty, the Tribunal stressed that loss of chance analysis cannot be used as a substitute for proving loss merely because the counterfactual concerns hypothetical future trading. Accordingly, the loss of chance claim advanced for Sub-Class B was struck out, although the remainder of Sub-Class B’s claim, particularly the forgone growth claim, was permitted to proceed.

The Tribunal ultimately concluded that certification of the collective proceedings was appropriate, noting that none of the Defendants opposed certification in principle. It therefore granted a Collective Proceedings Order, subject to limited conditions.

At the same time, the Tribunal sounded a clear note of caution regarding the future conduct of the proceedings. It observed that although Sub-Class A accounts for the majority of claimants numerically, the overwhelming proportion of the alleged damages derives from the forgone growth claims advanced by Sub-Class B and the Binance-related holdings in Sub-Class C. The Tribunal warned that, absent substantially improved evidence on market awareness, mitigation behaviour, class composition, and causation, these claims may face significant difficulties at trial. It indicated that early and focused case management would be required to determine whether the forgone growth claims are maintainable in principle.

The judgment thus reflects a careful balance, allowing the collective crypto-asset claim to proceed while clearly delineating the legal and evidential limits within which assertions of suppressed cryptocurrency adoption, network growth, and long-term valuation must ultimately be substantiated.

That balance has now been confirmed by the UK Supreme Court in its decision to decline permission to appeal, holding that the application raised no arguable point of law or issue of general public importance. As a result, the Tribunal’s approach to limiting speculative claims based on alleged long-term crypto-market development remains the operative judicial position, underscoring the courts’ reluctance to extend liability for delisting decisions beyond established principles of causation, mitigation, and proof.

For any additional information or assistance, please contact us at info@gtg.com.mt

Author: Dr Neil Gauci