Supreme Court Urged to Deny Coinbase User’s Privacy Challenge

The US government has urged the Supreme Court not to take up a Coinbase user’s challenge against the Internal Revenue Service’s (IRS) effort to obtain his crypto transaction records. In a filing dated May 30, Solicitor General D. John Sauer argued that Coinbase user James Harper has no Fourth Amendment right to shield his financial records held by the exchange. The government claimed that Harper “voluntarily” shared his data with Coinbase, and that the IRS followed proper legal procedures to obtain it through a judicially approved summons.

Harper’s case centers on a 2016 IRS investigation into widespread tax underreporting on cryptocurrency gains. At the time, the IRS discovered a sharp gap between the millions of Coinbase users trading Bitcoin (BTC) and the relatively few taxpayers who reported crypto gains. In response, the agency obtained a so-called “John Doe” summons compelling Coinbase to turn over records on high-volume customers.

Harper, who traded Bitcoin on Coinbase during the relevant years, later sued, claiming that the IRS’s actions amounted to an unconstitutional search of his personal records. Lower courts disagreed, ruling that Coinbase’s records are business documents — not Harper’s private papers — and that the IRS acted lawfully. In its brief, the government argued that Supreme Court precedent supports the IRS’s position. Citing past cases such as United States v. Miller, the government emphasized that individuals have no reasonable expectation of privacy in financial records held by third parties Coinbase. The filing also pointed to Coinbase’s own privacy policy, which warned users that information could be shared with law enforcement.

The Supreme Court has not yet decided whether it will hear the case. A denial would leave in place the First Circuit’s ruling in favor of the IRS. The government's position underscores the ongoing debate over the balance between individual privacy rights and the government's authority to enforce tax laws, particularly in the rapidly evolving landscape of digital currencies. This case highlights the complexities involved in regulating cryptocurrency transactions and the potential implications for users' privacy and the IRS's ability to enforce tax compliance.