Coinbase Fights Back: Urges Supreme Court to Block IRS Crypto Surveillance
Coinbase draws a line in the sand—taking its battle against IRS overreach to the Supreme Court. The exchange argues the agency’s sweeping demands for user data violate constitutional protections.
Why it matters: The case could set a precedent for how much leash regulators get to yank on crypto investors—because nothing says ’financial freedom’ like Uncle Sam rifling through your transaction history.
The bottom line: If the IRS wins, expect more exchanges to fold under pressure—or flee offshore. Another win for ’innovation-friendly’ policies.
At a high level, Coinbase is asking the Court to reconsider how the Fourth Amendment applies to digital financial data, arguing that users don’t surrender their right to privacy simply by storing information with a third party. And while the case extends beyond crypto, it strikes at the CORE of what digital assets and the underlying blockchain technology represent.
“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 goes on to warn that the IRS’s ability to use a John Doe summons in this way gives the agency “a real-time monitor” of every crypto transaction executed by the affected users.
The filing draws heavily on Carpenter v. United States (2018), where the Court ruled that the government’s access to historical cell-site location data without a warrant was a Fourth Amendment search. Coinbase argues that the IRS’s ability to reconstruct years of blockchain transactions and project into the future is even more intrusive, likening it to a “financial ankle monitor.”
Coinbase executives like CEO Brian Armstrong and Chief Legal Officer Paul Grewal have been vocal advocates for clearer, more modern digital privacy protections. In that vein, the brief urges the Court to “clarify” (if not outright discard) the third-party doctrine’s application to digital transactions, highlighting the unique nature of blockchain technology, which pseudonymizes but does not fully anonymize user activity.
“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.
A decision on whether the Court will hear the case is expected later this year. If accepted, oral arguments would likely take place next term.
A ruling in favor of privacy advocates could lead to a major constitutional reset in how digital data is treated under the Fourth Amendment. 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.
