Supreme Court Declines Crypto Privacy Case, Upholds IRS Data Access

The United States Supreme Court has declined to review a case involving a Coinbase user, James Harper, who alleged violations of his Fourth Amendment rights over data sent to the Internal Revenue Service (IRS). The case originated from the IRS compelling Coinbase to turn over data from certain users in a “John Doe” summons, leading Harper to file a lawsuit against the IRS in 2020. Harper's complaint asserted that the IRS and its officials conducted an “unlawful search and seizure of [his] private financial information,” in violation of the Fourth Amendment of the US Constitution.

The US District Court for the District of New Hampshire dismissed the case in March 2021, and the First Circuit also ruled against Harper on appeal. With the Supreme Court's refusal to hear the case, the lower court's ruling will stand, establishing significant precedents for digital privacy rights for crypto users in the US. Coinbase, which filed an amicus brief supporting Harper’s petition, warned that the lower court ruling could allow the US government to “trace users’ every crypto transaction in the past and monitor every crypto transaction in the future.”

Coinbase Chief Legal Officer Paul Grewal emphasized the broader implications of the ruling, stating that it extends beyond cryptocurrency to other financial and digital services. “We believe in tax compliance, but this goes far beyond a narrow and tailored request and far beyond crypto,” Grewal said. “This applies to banks, phone companies, ISPs, email, you name it [...] you should have the same right to privacy for your inbox or account as you have for a letter in your mailbox.”

The Supreme Court's decision supports previous rulings and has immediate implications for user privacy concerning third-party data sharing. The ruling backs the IRS's attempts to obtain financial records through judicial means, suggesting limited privacy protections for data shared with cryptocurrency exchanges. This decision sets a legal precedent for government access to crypto data, with similar cases expected to follow this legal judgment. The ruling may impact user privacy and the way cryptocurrency exchanges handle data requests from regulatory bodies. The Supreme Court's decision reinforces the government’s approach to obtaining third-party user data, highlighting potential outcomes of increased IRS scrutiny of cryptocurrency activities.