The Supreme Court is being urged to dismantle a controversial IRS tactic that allowed warrantless data grabs from 14,000 crypto users, redefining privacy rights for the digital age.
Mass IRS Record Seizure Hits 14,000 Crypto Users—Can the Supreme Court Push Back?
A constitutional showdown over the privacy rights of cryptocurrency users could reshape how digital financial data is protected under the Fourth Amendment. On June 13, the New Civil Liberties Alliance (NCLA) and Supreme Court litigator Kannon Shanmugam filed a reply brief with the U.S. Supreme Court in Harper v. Faulkender, challenging the federal government’s use of the “third-party doctrine” to justify warrantless seizures of crypto-related financial records. The case centers on James Harper, a Coinbase customer whose data was swept up in an Internal Revenue Service (IRS) probe. According to the brief:
The Internal Revenue Service unlawfully seized financial records of NCLA client James Harper and more than 14,000 other people from the Coinbase cryptocurrency exchange through abuse of a ‘John Doe’ summons.
The legal action follows a series of lower court rulings. In 2022, the U.S. Court of Appeals for the First Circuit ruled Harper could pursue legal action against the IRS. However, a federal district court dismissed the suit in 2023, and that dismissal was later upheld, with the courts relying on the third-party doctrine. NCLA contends this precedent—originally used in targeted investigations of individuals—cannot be justified when applied to mass data collection in the digital economy. Their position: “The Justices should return the doctrine to that focused, limited foundation or do away with it entirely.” This view echoes broader concerns in the judiciary, including Justice Sonia Sotomayor’s assertion that the doctrine is “ill suited to the digital age.”
Mark Chenoweth, president of NCLA, emphasized the broader stakes: “The third-party doctrine is a Fourth Amendment abomination. People have little choice in the digital age but to share private information with third-party service providers. Doing so does not surrender their property or privacy interests in that data, so the Court should require government agencies to obtain search warrants to access it.” Senior Litigation Counsel John Vecchione added:
The government has failed to proffer convincing reasons why certiorari ought not be granted in this case. The case not only represents an injustice to Jim Harper’s rights but also presents novel and important questions for Fourth Amendment rights in the digital age.
While law enforcement agencies warn that curtailing the doctrine could hamper criminal investigations, digital rights advocates argue that robust constitutional protections are essential as cryptocurrencies and decentralized platforms become central to financial life.
