The U.S. Supreme Court has declined to hear a case involving a Coinbase user, James Harper, who alleged that the Internal Revenue Service (IRS) violated his Fourth Amendment rights. This decision effectively upholds the IRS's authority to obtain user data from the cryptocurrency exchange Coinbase. The court's action lets stand a previous ruling from the First Circuit, which supported limitations on privacy rights for records held by third-party financial institutions.
The case originated from an IRS summons issued in 2016, compelling Coinbase to turn over transaction information on over 14,000 users, in an effort to uncover unreported cryptocurrency transactions. Harper subsequently filed a lawsuit in 2020, arguing that the IRS conducted an unlawful search and seizure of his private financial information, violating his Fourth Amendment rights. He specifically challenged the IRS summons, arguing it violated his Fourth Amendment rights, which protect against unreasonable government searches. Harper asked the Supreme Court to reexamine a 1976 ruling, U.S. v. Miller, which stated that bank customers do not have privacy rights in records held by their financial institutions.
Lower courts had sided with the IRS, citing the broad authority granted by Congress and existing legal frameworks that define the limits of such government action. The courts have argued that individuals have no reasonable expectation of privacy when voluntarily submitting data to third-party services. The First Circuit ruling stated that Harper's digital-transaction records were similar to traditional bank records, which the high court had previously decided were not private in the U.S. v. Miller case.
Coinbase, the largest crypto exchange in the U.S., had supported Harper's appeal and joined him in asking the Supreme Court to take up the matter. The company had resisted the IRS summons as long as possible without risking being held in contempt. Coinbase argued that users should retain privacy rights even when service providers hold their information, emphasizing that digital platforms deserve the same protections as traditional communication tools. Harper had criticized the Miller ruling as outdated, arguing that the government had inappropriately expanded it to cases involving transactions based on new technology, including blockchain. He stated that the third-party doctrine is especially maladapted to the modern era of the internet, cloud storage, and widespread digital transactions and has led to the denial of constitutional protections for troves of information stored with third parties out of modern necessity.
The Supreme Court's decision reinforces the third-party doctrine, which allows government agencies to access data shared with third parties, like banks, without needing a warrant. The Trump administration had urged the Supreme Court to quash the appeal, saying Harper lacks any reasonable expectation of privacy in Coinbase's records about his account. While Trump has taken a friendlier stance toward the crypto sector, his current and former administration had supported the IRS investigation, which began under President Barack Obama in 2016.
Legal experts warn that the decision may further normalize broad surveillance powers across financial and tech platforms, setting a precedent for expansive government access to user data. Harper argued that the lower court's ruling will effectively strip millions of Americans of meaningful privacy protections over their most sensitive financial data simply because they use modern financial service providers.
