Coinbase has urged the U.S. Supreme Court in a case which could fundamentally reshape America’s digital privacy laws.
Though not a direct party to the case, Coinbase joined several states, Elon Musk's X (formerly known as Twitter) and a handful of privacy advocacy groups in filing an amicus brief in Harper v. O'Donnell on Wednesday morning, calling on the Court to reconsider how the so-called third-party doctrine is applied in the digital age. This doctrine dates back to 1970s and states that people lose the right to privacy when they share their information with third-parties like phone companies, banks or crypto exchanges.
According to the brief, the IRS issued Coinbase in 2016 with a John Doe summons—an investigative tool used to compel third-party companies to provide information about unnamed taxpayers suspected of violating tax laws.
Unlike traditional summonses targeting specific individuals, a John Doe summons seeks data on a broad group of individuals—in this case, the IRS demanded information on more than 14,000 Coinbase users, claiming it needed the data to identify taxpayers who may not have reported their crypto gains. In 2021, the IRS sent John Doe summonses to rival crypto exchange Kraken as well as USDC stablecoin issuing company Circle in order to collect data.
Coinbase, at a very high level, is asking that the Court reconsider its interpretation of the Fourth Amendment in relation to digital financial information. It argues, for example, that users are not sacrificing their right to privacy by sharing data with a third-party. While the case goes beyond cryptocurrency, it is at the heart of digital assets and blockchain technology.
“Exposure of a person’s identity on the blockchain opens a potentially wide window into that person’s financial activity… easily ascertain[ing] all transactions the person has made using that address—or track future transactions,” the brief states.
Coinbase continues to say that the IRS is able to “monitor in real time” all crypto-transactions made by users who are affected.
Carpenter v. United States (2017), in which the Court held that the government’s ability to access historical location data for cell sites without a valid warrant constituted a Fourth Amendment Search. Coinbase says that IRS’s ability to reconstruct and predict blockchain transactions for years is even more intrusive. It compares it to “a financial ankle-monitor.”
Coinbase’s CEO Brian Armstrong, and its Chief Legal Officer Paul Grewal are vocal supporters of clearer digital privacy protections. This brief calls on the Court to clarify (if not discard outright) the Third-Party Doctrine’s application for digital transactions.
“Nobody could have imagined a society in which the IRS could achieve near perfect surveillance of thousands of blockchain users’ crypto transactions by strapping a financial ankle monitor—pegged to users’ wallet addresses—onto anyone the government thinks might be evading tax obligations,” the filing states.
The decision of whether or not the Court will take up the case should be made later in the year. Oral arguments will likely be held next year if the case is accepted.
If a ruling is in favor of privacy activists, it could result in a constitutional rewrite in the Fourth Amendment regarding how digital data should be treated. It could also force agencies and private companies to overhaul their data retention and disclosure practices—potentially disrupting law enforcement and regulatory strategies in financial surveillance.
