- Coinbase, X, and U.S. states ask Supreme Court to curb IRS’s mass crypto data collection practices.
- The legal brief challenges the constitutionality of John Doe’s summonses to access user financial records.
- A Supreme Court ruling could redefine digital privacy rights and limit federal access to crypto user data.
Coinbase has submitted a supporting brief to the U.S. Supreme Court, asking it to restrict the IRS’s widespread data gathering aimed at crypto users. This action places Coinbase alongside Elon Musk’s X and multiple U.S. states in an expanding legal dispute over the agency’s powers.
The filing supports James Harper, a former Coinbase user who sued the IRS after realizing that the agency had seized his financial records along with more than 14,000 other users’ data. The IRS obtained the data using a “John Doe” summons, a legal mechanism that allows it to request information about individuals whose identities are not specifically known.
Tech and Legal Allies Challenge IRS Overreach
Coinbase’s legal challenge claims that such summonses violate the Fourth Amendment, which requires that searches and seizures be reasonable. The company argues that normal users are entitled to a reasonable expectation of privacy in their digital financial records, especially when such platforms have specific privacy agreements in place.
Chief Legal Officer at Coinbase, Paul Grewal, also highlighted the effect of the IRS’s actions, saying that people should have the same right to privacy for their digital accounts as they do for their physical mail. He added that John Doe’s summons against Harper could set a troubling precedent, possibly allowing unchecked government surveillance of digital platforms.
Coinbase argues that the Supreme Court needs to reexamine how the ‘third-party doctrine’ applies in today’s digital landscape. The doctrine, which permits the government to access information shared with third parties without a warrant, has also faced criticism as more of the personal data is being stored on the internet. Coinbase has asked the court to make it clear whether digital financial records deserve greater constitutional protection.
Elon Musk’s X (formerly Twitter) has also submitted a short warning that such broad subpoenas might threaten user privacy across social networks. In addition, several U.S. states’ attorneys general also filed supporting briefs arguing that the IRS’s methods violate civil liberties and constitutional protections.
Coinbase Recalls Earlier Clash with IRS
The case also served as a new reminder of the first John Doe summons that the IRS had issued to Coinbase in 2017. The summons initially sought data on more than 500,000 users. Coinbase responded with a legal challenge, which resulted in a substantial reduction, limiting the disclosure to about 14,000 users.
The reduced scope in 2017, however, appears not to have debunked Coinbase’s concerns about the precedent in place for such actions. The exchange says that if the IRS is allowed to continue wielding these tools without judicial oversight, the protections of digital privacy for the entire financial and technology sectors will be at risk.
Legal experts say that the IRS has frequently relied on John Doe summonses to identify cryptocurrency holders suspected of filing false income returns or not paying taxes. Meanwhile, Kraken and Circle have received similar summonses in recent years.
The Supreme Court has yet to decide whether or not to hear Harper’s case. But the amount of support he’s received from private firms and state governments has drawn national attention to the matter. A ruling in his favor could change how government agencies take on digital financial data and enforce tax laws in the world of cryptocurrency.
