U.S. Government Urges Supreme Court to Reject Coinbase User’s Crypto Records Challenge

The U.S. government is pushing back against a legal challenge that seeks to block the Internal Revenue Service (IRS) from accessing crypto transaction records of a Coinbase user, arguing the user has no constitutional right to shield that data.

In a Supreme Court filing dated May 30, Solicitor General D. John Sauer argued that Coinbase user James Harper “voluntarily” provided his financial information to the exchange, and that the IRS acted within the law when it obtained the records through a court-approved summons.

Background: IRS Targets Crypto Tax Underreporting

The dispute stems from a 2016 IRS investigation into widespread underreporting of cryptocurrency gains. At the time, the IRS identified a significant gap between the number of Coinbase users actively trading Bitcoin (BTC) and the far smaller number of taxpayers reporting crypto income.

To address the gap, the IRS obtained a “John Doe” summons, which compelled Coinbase to turn over transaction records for high-volume customers.

Harper, who traded Bitcoin on Coinbase during the years in question, later filed suit, claiming the IRS’s actions amounted to an unconstitutional search under the Fourth Amendment.

An excerpt of the filing. Source: Supreme Court

Government: No Privacy Right Over Shared Financial Records

In its filing, the government cited past Supreme Court precedent, including United States v. Miller, to argue that individuals have no reasonable expectation of privacy over financial records held by third parties like Coinbase.

“The IRS followed proper legal procedures, and Coinbase’s records are business documents, not Harper’s personal papers,” the government stated.

The brief also pointed to Coinbase’s own privacy policy, which explicitly informs users that data may be shared with law enforcement if required.

“To the extent petitioner made those arguments below, the court of appeals correctly rejected them as both foreclosed by this Court’s precedent and meritless,” the government added.

The Supreme Court has not yet decided whether it will take up the case. If the court declines, the First Circuit’s ruling in favor of the IRS will stand.

Coinbase Hit by Major Data Breach

Separately, Coinbase is grappling with the fallout from a recent major data breach. On May 15, the exchange disclosed that attackers bribed customer support staff in India to gain access to sensitive user data.

The breach compromised customer names, account balances, and transaction histories, affecting roughly 1% of Coinbase’s monthly transacting users. Among the victims was high-profile venture capitalist Roelof Botha, managing partner at Sequoia Capital.

Following the breach, Coinbase faced a wave of legal action. At least six lawsuits were filed on May 15–16, with plaintiffs accusing the exchange of failing to implement robust security measures and mishandling its breach response.