US Government Defends IRS Access to Coinbase Privacy Records

Highlights:

• Coinbase privacy rules do not prevent the IRS from accessing user crypto information.
• The IRS obtained crypto transaction data lawfully after getting a court-approved summons.
• A recent breach of user data from Coinbase has triggered various lawsuits.

The US government wants the Supreme Court to dismiss the case of Coinbase user James Harper. Harper is working to block the IRS from having his cryptocurrency financial information. The government claimed that Harper did not have the right under the Fourth Amendment to prevent the IRS from obtaining information from Coinbase. Harper’s privacy was not invaded, as he willingly gave his data to the exchange, they point out.

The case started when the IRS investigated broad tax underreporting on crypto profits back in 2016. Many people traded Bitcoin through Coinbase back then, but very few shared their profits with the IRS. The agency used a “John Doe” summons to force Coinbase to give information on those users who transact large amounts, including Harper. The lower courts upheld that because Coinbase stored the records as business documents, the IRS could look at them.

In addition, the government pointed out that Coinbase’s privacy policy alerts users that their data could be disclosed to law enforcement. It confirms that Harper was aware that his data might be investigated by law enforcement. Legal precedents, including United States v. Miller, state that individuals lack privacy rights over third-party financial records. As a result, the government claims that, with proper permission from the court, the IRS was allowed to obtain crypto transaction records.

U.S. government defends IRS in Coinbase privacy case

The U.S. government has urged the Supreme Court to reject Coinbase user James Harper’s challenge against the Internal Revenue Service (IRS), arguing that he has no Fourth Amendment right to shield financial records held by the…

— CoinNess Global (@CoinnessGL) May 31, 2025

Coinbase Challenges IRS, Highlighting Privacy Concerns

In April 2025, Coinbase responded to the decisions and submitted an amicus brief to take part in Harper’s lawsuit. In response, the exchange mentioned that the case could have big implications for the privacy of digital users in America. Moreover, Coinbase requested that the court protect users’ digital privacy and describe how much search authority the government has under the third-party doctrine.

The company argued that the IRS’s way of collecting digital currency records is similar to a dragnet search. In addition, Coinbase claims this method does not protect privacy and wants regulations to be clearer. Even though the lower courts favored the IRS, Coinbase believes the Supreme Court should step in to defend the privacy of digital asset users.

Coinbase Data Breach Adds Pressure on Privacy Debate

In May 2025, Coinbase was hit with a major data security breach. Some hackers offered money to employees at Indian customer support to get customer data, which included names and transaction information. The incident involved about 1% of active users and well-known investors were part of it as well. Because of this breach, Coinbase was hit with at least six lawsuits for not protecting its users’ data properly.

Coinbase faces another class-action lawsuit over its data breach, with investors claiming damages from the stock price drop following the disclosure. pic.twitter.com/E0DGDP68Bg

— BULLSTREET GROUP (@Bullstreetgroup) May 26, 2025

This incident has led to the community raising questions about how safely crypto platforms handle people’s personal data. It also points out the risks that users have when their information is stored on third-party platforms. While the privacy dispute continues in court, the breach forces Coinbase to focus more on protecting user data.

If the Supreme Court decides against hearing the case, the IRS will be able to use its current powers to request third-party financial records. On the other hand, a hearing might define the limits on government searches and support privacy rights in the modern digital era. The Supreme Court has not yet said if it will hear the case.