Key Takeaways
- The Supreme Court declined to hear a challenge to IRS access of customer data from bitcoin exchanges.
- Centralized exchange users' transaction records can be obtained by the government without a warrant.
- The decision could encourage bitcoin users to shift toward self-custody and decentralized platforms.
The U.S. Supreme Court has declined to review a legal challenge questioning the Internal Revenue Service’s ability to obtain customer data from bitcoin exchanges like Coinbase without a specific warrant.
By denying the petition in Harper v. Faulkender, the Court allowed a previous lower-court decision to stand, marking a significant legal precedent in favor of the IRS.
Impact on user privacy and exchanges
This outcome confirms that financial information stored on centralized exchanges does not receive the same constitutional privacy protections as personal documents under the Fourth Amendment.
The long-standing “third-party doctrine” applies—once users entrust their data to a third party, such as a bitcoin exchange, their expectation of privacy is reduced. As a result, the government can often obtain transaction records through a subpoena, not a warrant.
For bitcoin users, this means that trading on U.S. exchanges subjects their data to potential government scrutiny.
The Court’s decision is likely to encourage movement toward self-custody wallets or decentralized platforms where users control their own private keys.
Case background and timeline
The dispute began with a 2016 IRS “John Doe” summons demanding Coinbase records for U.S. users who transacted over $20,000 between 2013 and 2015.
Coinbase initially resisted but eventually complied after a narrowed court order.
James Harper, a Coinbase user, contested the summons, arguing that it constituted an unreasonable search. However, federal courts repeatedly sided with the government, citing the third-party doctrine and regulatory requirements.
The Supreme Court’s denial of certiorari lets the First Circuit’s ruling stand, cementing the IRS’s ability to compel exchanges to disclose user data.
This places centralized bitcoin exchanges firmly under the same regulatory requirements as traditional banks.
