Trump Admin Beats Coinbase, Privacy Advocates in Supreme Court IRS Showdown

The U.S. Supreme Court declined Monday to take up a case that would have re-examined how the Fourth Amendment applies to digital financial data, in a blow to crypto heavyweights like Coinbase who had thrown their weight behind the case.

The case, Harper v. Faulkender, petitioned the court to re-examine a decades-old ruling which held that bank customers don’t have privacy rights to records held by their financial institutions.

This “third-party doctrine” has long been critiqued by conservative scholars who claim it infringes on user privacy. In 2018, the Supreme Court made an exception to the principle, ruling that in the case of cell phone records held by phone carriers, a warrant is needed to access certain customer data.

Many in the crypto industry were hoping a similar exception could be made for crypto transaction data. Earlier this year, Coinbase filed an amicus brief in support of the case of James Harper, a man who claimed the IRS violated his Fourth Amendment rights by seizing his crypto transaction data from third-party exchanges.

The case would have examined whether blockchain data qualified as a sensitive and novel enough category of information that it should be treated differently with respect to the third-party doctrine.

On Monday, however, the Supreme Court declined to take up Harper’s case. The justices did not offer an explanation as to why it opted not to hear it. 

A Coinbase spokesperson did not immediately respond to Decrypt’s request for comment concerning the decision, and whether the company hopes to pursue the legal issue in question in the future.

Coinbase has long voiced its opposition to broad government requests for user data. In 2016, the IRS asked Coinbase for financial data on more than 14,000 of its customers, whom the revenue collector believed may have avoided paying taxes on crypto gains. Coinbase has said it resisted the request as long as it could before risking legal jeopardy. 

While today’s outcome may have been a loss for the crypto industry, it was simultaneously a victory for the Trump administration, which defended the agency’s ability to collect financial information from crypto exchanges in the interest of identifying individuals who potentially failed to pay taxes.

Despite its aggressively pro-crypto stance, the Trump administration has, under both of the president’s terms in office, consistently supported the IRS in such situations.

Edited by Andrew Hayward