The U.S. Supreme Court has rejected Coinbase's request to block the Internal Revenue Service (IRS) from accessing user data. This decision was announced on June 30, 2025, it allows the IRS to proceed with its investigation into Coinbase users suspected of not properly reporting cryptocurrency income, reinforcing the agency’s authority to obtain financial records from crypto exchanges.

Case Details

The legal battle dates back to 2016 when the IRS issued a summons to Coinbase, seeking detailed information on more than 14,000 Coinbase users. The IRS wanted to uncover potential tax evasion related to unreported cryptocurrency transactions. Coinbase initially rejected the demand, citing user privacy concerns and the need for stronger legal protections for cryptocurrency data. However, after lower courts ruled in favour of the IRS, Coinbase complied with the data request.

James Harper, a Coinbase customer, filed a lawsuit in 2020 against the IRS’s actions as a violation of his Fourth Amendment rights against unreasonable searches and seizures. Harper argued that the IRS’s summons lacked individualized suspicion and infringed on privacy. Coinbase supported Harper’s legal challenge, urging the Supreme Court to reconsider the application of the third-party doctrine to blockchain data, emphasizing the sensitive nature of cryptocurrency transactions.

Supreme Court’s Decision

The Supreme Court refused to hear the case, which means that the lower court rulings stand that uphold the IRS’s legal authority to access user data from Coinbase without direct notification to the individuals involved. This decision effectively reinforces the longstanding third-party doctrine, which allows government agencies to obtain information shared with third parties such as banks or exchanges without a warrant. Coinbase and privacy advocates had hoped the court would extend greater privacy protections to cryptocurrency users. However, the Supreme Court’s denial signals that digital financial data remains subject to existing legal frameworks, leaving users with limited privacy safeguards when sharing information with third-party platforms.

Privacy Concerns

The Supreme Court’s decision has reignited debates about the balance between regulatory oversight and individual privacy in the digital space. Privacy advocates warn that allowing broad government access to cryptocurrency transaction data could threaten personal freedoms and erode trust in digital financial systems. The decision also raises concerns about the potential for increased IRS scrutiny of crypto traders and the broader implications for data privacy across digital platforms. Coinbase’s Chief Legal Officer, Paul Grewal, highlighted that this issue transcends cryptocurrency, affecting all forms of online data and communications.

What This Means for Crypto Industry

This decision of Supreme Court sets a precedent likely to encourage the IRS and other regulatory bodies to pursue similar data requests from other cryptocurrency exchanges. The decision signals tighter regulatory scrutiny for the crypto industry, compelling exchanges to prepare for increased compliance demands while navigating privacy concerns.

For users, the ruling means that their cryptocurrency transaction data held by exchanges like Coinbase may be accessible to tax authorities without prior consent or notification. This development emphasizes the importance of transparency and accurate tax reporting for cryptocurrency investors, as well as the need for vigilance regarding data privacy in the evolving digital financial landscape.