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Harper Amicus Brief; Coinbase Files to Dismiss SEC Lawsuit; Chainalysis Crypto Geography Report

DEF’s Harper Amicus Brief

What happened?

On October 20th, the DeFi Education Fund filed an amicus brief to the U.S. Court of Appeals for the First Circuit in Harper v. Internal Revenue Service. This case revolves around a “John Doe” summons the IRS sent to Coinbase that resulted in the collection of information for about 8.9 million transactions by 14,355 Americans (none of whom were accused of any wrongdoing prior to the summons) over a three-year period. The information collected included the user's name, social security number, and related wallet addresses. Our brief is meant to assist the court in understanding the Fourth Amendment implications that collecting digital asset transaction history presents and points out that in this modern context, the District Court erred in applying decades-old Supreme Court precedent.

Central to our brief is the understanding that pursuant to Carpenter v. United States, the application of the “third-party doctrine” – which in certain contexts means that a person’s choice to share information with a third party, such as a bank, waives that person’s reasonable expectation of privacy under the Fourth Amendment – should be appropriately limited and far less sweeping than the district court’s interpretation. As we argue, the Circuit Court should acknowledge Carpenter’s holding that the third-party doctrine only applies when the government’s access to information is limited and not overly intrusive. This is especially important in the context of cryptocurrency transactions recorded on a public blockchain, where the government’s collection of information that can tie a citizen’s identity to a wallet address—using authorities only meant to produce information about individual transactions— allows for constant and persistent surveillance over a vast array of users’ past and future transactions. Paradigm and Coin Center also submitted briefs in the case.

What does this mean?

DEF submit amicus briefs in precedent-setting cases to assist the court in understanding how novel technology presents novel legal issues while at the same time working to ensure bedrock constitutional rights are not encroached upon simply based on a lack of understanding of how the technology actually works. “When old precedents meet new technology, courts must “assur[e] preservation of that degree of privacy against government that existed when the Fourth Amendment was adopted.” Kyllo v. United States, 533 U.S. 27, 34-35 (2001). We hope that the Court of Appeals will consider these issues in great detail and reverse the lower court's decision dismissing Harper’s case

Coinbase Files to Dismiss SEC Lawsuit

What happened?

On Tuesday, Coinbase submitted its reply brief in further support of its motion for judgment on the pleadings, which seeks dismissal of the SEC lawsuit filed against it. You can find DEF’s summary of Coinbase’s rule 12(c) motion for judgment on the pleadings here, and our amicus brief on the matter here.

In its latest brief, Coinbase reiterates its previous arguments, and in particular, doubles down on its position that the SEC has exceeded its authority by incorrectly expanding the definition of "investment contract" to cover crypto asset transactions on its platform. According to Coinbase, decades of case law establish that an investment contract requires a contractual undertaking beyond the point of sale related to a financial interest in an enterprise. It argues that the SEC fails to allege this in the complaint and its arguments regarding what constitutes an investment contract are wrong. And “Congress did not grant the SEC open-ended authority to regulate commerce; it granted the authority to regulate securities.”

What does this mean?

With the filing of this reply brief, Coinbase’s motion for judgment on the pleadings is fully briefed and (almost) ready for a decision. Coinbase requested oral argument on its motion and Judge Katherine Polk Failla granted their request, setting oral arguments for January 17, 2024. Judge Failla is well-positioned to decide this motion because she is familiar with crypto issues from her recent dismissal of a class-action suit against Uniswap Labs and others. While it is entirely up to a judge to set the schedule for when they decide a motion, it is likely we will see a decision in 2024, after oral argument takes place.

Chainalysis Crypto Geography Report

What happened?

Chainalysis, a blockchain analysis firm, recently published its annual Geography of Cryptocurrency Report, covering topics such as unique forms of crypto usage around the world, a regional breakdown of retail & institutional crypto usage, and the effects of policy and regulation on crypto adoption.

The report presents the 2023 Global Crypto Adoption Index, in which the US is ranked 4th globally and is a runner-up for the total Retail DeFi Value received in 2022-23. Other notable mentions include India in 1st place and Ukraine in 5th. Such regional diversity in the top 20 list is reflective of the global nature and accessibility of crypto and DeFi .

Chainalysis concludes that North America is the largest cryptocurrency market, with an estimated $1.2 trillion in value received on-chain between July 2022 and June 2023. This represents 24.4% of global transaction activity, with the U.S. taking up the largest share of these transactions. North America’s monthly transaction volume between July 2022 and June 2023 was dominated by large institutional transactions (transfers above $10 million), mostly in stablecoins and Bitcoin.


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