High Court Petitioned by U.S. to Drop Coinbase User Data Dispute Case

High Court Petitioned by U.S. to Drop Coinbase User Data Dispute Case

The U.S. Supreme Court is deliberating whether to take up a case challenging the IRS's access to cryptocurrency trading records belonging to an individual, James Harper, who contends that his privacy rights under the Fourth Amendment have been infringed upon. A government lawyer, D. John Sauer, argued in a court filing on May 30, 2025, that Harper cannot claim privacy protections because he knowingly provided his data to Coinbase, the platform from which the IRS obtained the information legally via a court-approved request.

Harper's legal battle originated from an IRS investigation initiated in 2016, which disclosed a substantial number of Coinbase users who neglected to declare their cryptocurrency profits. At the time, the value of Bitcoin hovered around $103,447, yet only a handful of users reported their earnings to the IRS, despite millions actively trading on Coinbase. Harper filed a lawsuit, objecting to the IRS's access to his records, but the government maintains that they adhered to the established procedures.

The IRS utilized a "John Doe" summons, a special request, to compel Coinbase to disclose information about active users, including Harper, who engaged in significant cryptocurrency trading. Harper objects to the disclosure and has taken legal action, asserting that the IRS is encroaching upon his privacy. However, lower courts have ruled that Coinbase's records are the property of the company, not Harper, and, therefore, are not private property subject to his privacy claims. The courts have also affirmed the IRS's right to pursue such action and have not found any missteps in the process.

In its argument, the government referenced past cases, including United States v. Miller, to support the assertion that individuals do not enjoy privacy rights over third-party financial records. The government also emphasized Coinbase's privacy policy, which notifies users that their data may be shared with law enforcement agencies. As of now, the Supreme Court has yet to announce its decision on whether to hear Harper's case, with a refusal to intervene upholding the lower courts' decisions that favor the IRS.

Notably, on May 15, 2025, Coinbase revealed that some of its support personnel based in India had been bribed by hackers to access and steal information, including names and trading records, from about 1% of its active users, including a well-known investor, Roelof Botha from Sequoia Capital. This revelation led to the institution of six lawsuits against Coinbase on May 15 and 16, with plaintiffs citing inadequate security measures on the part of the exchange and its mishandling of the situation. This incident underscores the security concerns associated with the protection of individuals' information in the cryptocurrency sphere.

In essence, the upcoming Supreme Court ruling on Harper's case could establish significant precedents regarding privacy rights, financial transparency, and the balance between government oversight and individual privacy in the digital age. The decision could potentially bolster privacy protections, improve tax compliance, enhance regulatory clarity, and influence the public's perception and trust in digital platforms.

1. The Supreme Court's decision on Harper's case could potentially establish significant precedents in the realm of cryptocurrency and general-news, influencing privacy rights, financial transparency, and the balance between government regulations and individual privacy in the digital age.
2. In loss for James Harper, if the Supreme Court refuses to intervene, it would uphold lower courts' decisions that favor the IRS, potentially bolstering tax compliance, enhancing regulatory clarity in the realm of finance and technology, and influencing the public's perception and trust in digital platforms like cryptocurrency exchanges.
3. The ongoing legal battle between James Harper and the IRS over access to his cryptocurrency trading records has raised concerns about crime and justice within the cryptocurrency sphere, as the incident involving Coinbase's data breach and subsequent lawsuits highlight the security risks and potential misuse of personal information in this domain.

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