US Government Urges Court to Reject Coinbase User's Crypto Records Fight

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. This assertion is in line with the government's stance that individuals have no reasonable expectation of privacy in financial records held by third parties, as established in past cases such as United States v. Miller.

According to Harper's case, which centers on a 2016 IRS investigation into widespread tax underreporting on cryptocurrency gains, the agency 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 IRS obtained a "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.

The government's filing emphasized that Supreme Court precedent supports the IRS's position. Citing past cases such as United States v. Miller, the government pointed to the fact that individuals have no reasonable expectation of privacy in financial records held by third parties. The filing also noted that Coinbase's own privacy policy, which warned users that information could be shared with law enforcement.

In a recent turn of events, May 15, Coinbase disclosed a data breach in which attackers bribed customer support staff in India to access sensitive user information. Stolen data included customer names, account balances, and transaction histories. Among those affected was venture capitalist Roelof Botha, managing partner at Sequoia Capital.

Coinbase also faced a wave of lawsuits following the revelation. At least six legal complaints were filed on May 15 and 16, with plaintiffs accusing the exchange of failing to implement adequate security measures and mishandling its response to the breach.

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.