Spotify Lawsuit Moved Into Arbitration

Spotify has won an early legal battle in a lawsuit accusing the well-known song streaming company of pushing paid songs onto listeners through a system compared to payola. A federal judge out of New York ruled that the case must move out of court and into private arbitration, which would end efforts to turn the lawsuit into a class action involving other Spotify users.

The lawsuit was filed by plaintiff and Spotify user, Genevieve Capolongo, a subscriber who claimed the platform misled listeners about how songs and playlists are recommended. According to the complaint, Spotify promoted its playlists and music suggestions as personalized for each user without clearly explaining that some labels and artists could receive added exposure through lower royalty deals tied to the company’s Discovery Mode program.

The plaintiff argued that the system worked like a newer version of payola, a long-criticized practice in the music business where money or favors are exchanged for airplay without listeners knowing about it. Radio payola scandals have existed for decades and led to tighter rules around music promotion. The suit claimed Spotify’s recommendation system blurred the line between organic suggestions and paid promotion.

In her complaint, Capolongo said she often listened to music outside the mainstream but still received repeated recommendations for major artists such as Drake, Zach Bryan, and Justin Bieber. She argued that Spotify’s recommendations were not shaped only by personal listening habits, but also by  hidden business agreements.

The lawsuit asked the court to order Spotify to tell users when paid promotion may have influenced playlist placement or recommendations. It also sought class-action status for an estimated 100 users across the U.S. and requested damages totaling more than $5 million before fees and interest. Capolongo sought only a small amount in personal damages, estimated between $5 and $21.

Spotify responded by asking the court to force the dispute into arbitration instead of allowing it to continue in public court. The company mentioned its terms of use, which contain an arbitration clause that users agree to when creating accounts and continuing to use the service.

Judge John G. Koeltl, appointed to his post by former Republican president Bill Clinton, sided with Spotify in a ruling issued on April 30. The judge said Capolongo agreed to Spotify’s terms when opening her account in 2021 and later continued using the service after receiving updated versions of those terms in 2023 and 2025.

Court records showed Spotify sent notices about the updated terms through both email and in-app messages. Those notices included links directing users to the revised agreement. According to the ruling, Capolongo had the chance to review the changes and also had an opportunity to opt out of the arbitration section but did not do so.

The judge ruled that continuing to use the streaming service after receiving notice counted as acceptance of the updated agreement. Because of that, the case could not move forward in the public court system.

The ruling also ended the class-action part of the lawsuit. Spotify’s user agreement states that disputes must be handled individually and not as part of a larger group claim. That language prevented Capolongo from pursuing claims on behalf of other subscribers.

Capolongo had argued that arbitration should not apply because it limits discovery, the legal process where each side gathers evidence from the other. The judge rejected that argument and ordered both parties to continue through private arbitration instead.

The dispute will now move to the National Arbitration and Mediation organization, where the matter will be handled outside the public courtroom process. The federal case has been paused while arbitration takes place.

This decision marks another example of companies successfully relying on user agreements to take suits out of public court. Arbitration has become common across streaming services, apps, and online platforms, in general. Critics say these agreements favor companies by keeping disputes private, while businesses argue they offer a faster, more reasonable way to settle disagreements.

Sources:

Spotify wins motion for arbitration in ‘payola’ lawsuit

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