Coinbase IRS Privacy Case: U.S. Government Rejects User’s Appeal

Coinbase IRS Privacy Case: Government Backs IRS Against User Challenge

The U.S. government is urging the Supreme Court to reject a privacy lawsuit involving Coinbase and the Internal Revenue System. The case centers on James Harper, a user who traded Bitcoin on the platform and is now challenging how the IRS got access to his crypto records. In the year 2016, the body started a major investigation into people not reporting cryptocurrency profits and they used a legal process to obtain user information from Coinbase. Harper feels the search into his finances was unjustified, but the government insists the law was correctly applied and said it did not invade his privacy.

IRS Used Legal Summons to Get User Data

Harper’s case started when the IRS noticed a big gap between the number of people trading crypto and those reporting profits on their tax forms. To identify who might be avoiding taxes, the regulatory system issued something called a “John Doe” summons. This type of summons doesn’t name individuals but forces companies like Coinbase to hand over data on certain users, especially high-volume traders.

Harper was one of those users. He later sued the IRS, claiming they violated his Fourth Amendment rights, which protect against illegal searches. He argued that the government should have needed a warrant or specific cause before going through his Coinbase records.

Government Says Privacy Claim Doesn’t Hold

In a May 30 filing, the U.S. Solicitor General defended the regulatory's actions, saying that Harper had no reasonable expectation of privacy because he shared his data with a third party, Coinbase. According to the government, once data is stored with a company, it’s no longer fully protected as “private papers.”

The filing also pointed to the own privacy policy of the platform, which clarifies that user data could be shared with law enforcement. Since the IRS got a judge’s approval to issue the summons, officials argue the process was entirely legal.

Lower Courts Agreed with IRS

Harper’s case has already been rejected by lower courts. Judges ruled that the information collected from the platform belonged to the company as business records, not to Harper as private property. The courts also said earlier Supreme Court rulings support the idea that financial records held by third parties don’t get the same protections of the personal records.

The U.S. government echoed those rulings in its Supreme Court brief, arguing that nothing unlawful took place and that Harper’s claims don’t stand up under current law.

Coinbase Takes Harper’s Side

In April 2025, the company sent a legal brief to the court to reconsider the rules on privacy rights in relation to technology. The exchange said that privacy should not be taken away from Americans simply because they use online services.

They pointed out that this makes things much riskier for future privacy.

What Happens Next?

The Supreme Court is yet to say if it will accept the case for review. If the deadline is missed, the IRS will take the win and can send more summons to get crypto data.

The final judgement may influence how much security of the private records people get when using crypto-financial services, especially for Coinbase users and traders relying on third-party services.