US Supreme Court Rejects Review of IRS Lawsuit Regarding Coinbase User Data

Key Takeaway – Important Points to Remember

• IRS has authority to collect crypto data from exchanges: The ruling confirms that the IRS can use John Doe Summons to force exchanges like Coinbase to provide user information without requiring separate court orders.
• Crypto privacy rights are limited: The Fourth Amendment does not protect cryptocurrency transaction data as users expected, creating a legal gap regarding digital privacy.
• IRS surveillance will intensify: With warning letters increasing by 758%, crypto users need to prepare for stricter oversight from tax authorities and ensure full compliance.
• Long-term legal precedent: This decision affects not only Coinbase but also paves the way for the IRS to request data from other exchanges, banks, and digital service providers.

The US Supreme Court has officially declined to hear a significant lawsuit related to cryptocurrency data privacy, allowing lower court rulings to stand against a Coinbase user who sued the Internal Revenue Service (IRS).

Background and Legal Developments of the Case

In a recent announcement, the Supreme Court rejected James Harper’s petition to review his lawsuit against the IRS and its officials. The case originated from the IRS forcing Coinbase to surrender user data through a “John Doe” summons, leading Harper to file a lawsuit against the federal tax agency in 2020.

Harper alleged that the IRS had “unlawfully searched and seized personal financial information,” violating the Fourth Amendment of the US Constitution regarding privacy rights. The US District Court in New Hampshire dismissed the lawsuit in March 2021. Subsequently, Harper appealed to the First Circuit Court of Appeals but also received an unfavorable ruling.

The Supreme Court’s refusal to review means the lower court’s ruling will remain in effect, creating an important precedent for digital privacy rights of cryptocurrency users in the United States.

Coinbase’s Position on Privacy Rights

Coinbase filed an amicus brief supporting Harper, warning that if the lower court ruling is upheld, the US government could “track every past cryptocurrency transaction of users and monitor every future crypto transaction.”

Paul Grewal, Coinbase’s Chief Legal Officer, emphasized: “We believe in tax compliance, but this goes far beyond a narrow and tailored requirement. This applies to banks, phone companies, ISPs, email… you should have the same privacy rights for your inbox or account as you do for a letter in your mailbox.”

Impact on Crypto Community and John Doe Summons Significance

After the 2025 tax season, cryptocurrency users are receiving numerous warning letters from the IRS. Crypto tax software company CoinLedger reports that users mentioning IRS letters in support increased by 758%. This reflects the increasing number of letters the IRS sends in response to unreported or underreported digital asset transactions.

CoinLedger explains: “IRS letters do not necessarily indicate wrongdoing. In many cases, recipients are simply crypto investors that the IRS knows about through John Doe Summons sent to exchanges like Coinbase and Poloniex.”

This ruling creates an important precedent for the future of cryptocurrency data privacy and the relationship between crypto users and the US tax agency.