- The crypto exchange urged the Court to reconsider the “third-party doctrine” as it applies to digital financial data.
- While Coinbase is not a direct party to the case, the company has a vested interest in how the Court interprets privacy protections.
- The Supreme Court is expected to decide later this year whether to hear the case.
Coinbase, alongside several states, technology firms, and advocacy groups, is calling on the US Supreme Court to revisit long-standing digital privacy standards that critics say no longer reflect the realities of the internet age.
In an amicus brief filed Wednesday in Harper v. O’Donnell, the crypto exchange urged the Court to reconsider the “third-party doctrine” as it applies to digital financial data.
In 2020, James Harper, a Coinbase user, filed a lawsuit against the IRS, alleging the agency unlawfully obtained information that revealed his identity as a cryptocurrency holder.
Challenge to decades-old legal standard
The third-party doctrine—established through rulings in the 1970s—holds that individuals forfeit their expectation of privacy over data shared with third parties, such as banks or phone companies.
Coinbase argues that this principle, when applied to blockchain and digital assets, grants government agencies sweeping surveillance capabilities without the judicial oversight typically required for such intrusions.
While Coinbase is not a direct party to the case, the company has a vested interest in how the Court interprets privacy protections in the context of financial data stored or processed on its platform.
IRS use of broad summons under scrutiny
The case centers on the Internal Revenue Service’s use of a “John Doe” summons, which allows investigators to compel third parties to disclose data on unnamed individuals.
In 2016, the IRS served such a summons on Coinbase, requesting user data on more than 14,000 customers as part of an effort to identify individuals potentially underreporting crypto gains.
Similar summonses were later issued to Kraken and Circle in 2021.
Unlike traditional summonses, John Doe requests are not tied to specific individuals, but rather seek data on broad swaths of users.
Coinbase contends that this investigative tool, when used in the digital asset space, effectively gives the IRS a “real-time monitor” over user transactions.
Privacy in the Blockchain era
In its brief, Coinbase highlighted the unique characteristics of blockchain technology, which allows observers to trace past and future transactions tied to a wallet address.
This level of visibility, the company argues, amounts to what it calls a “financial ankle monitor.” The brief draws comparisons to Carpenter v. United States (2018), a case in which the Supreme Court ruled that obtaining historical cell phone location data without a warrant violated the Fourth Amendment.
Coinbase contends that the IRS’s ability to reconstruct years of blockchain activity is even more intrusive.
“Exposure of a person’s identity on the blockchain opens a potentially wide window into that person’s financial activity,” the company said, warning of the implications for user privacy and financial freedom.
The Supreme Court is expected to decide later this year whether to hear the case. If accepted, oral arguments would likely be scheduled for the next term.
Coinbase executives, including CEO Brian Armstrong and Chief Legal Officer Paul Grewal, have consistently advocated for updated legal frameworks that reflect the evolving nature of digital finance.
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