Coinbase Inc. lost a bid to block an Internal Revenue Service investigation into whether some of the company’s customers haven’t reported their cryptocurrency gains.
U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco ruled that the tax agency’s demand for information isn’t overly intrusive. The price of bitcoin has been soaring and crossed $10,000 Tuesday.
“That only 800 to 900 taxpayers reported gains related to bitcoin in each of the relevant years and that more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of bitcoin in a given year suggests that many Coinbase users may not be reporting their bitcoin gains,” she wrote. “The IRS has a legitimate interest in investigating these taxpayers.”
The company, one of the world’s largest virtual currency exchanges, has been sparring since last year with the IRS over its summons—and continued to resist turning over the information even after the agency scaled back its request in July. Coinbase and industry trade groups contend the government’s concerns about tax fraud are unfounded and that its sweeping demand for information is a threat to privacy.
Last year, analysts said similar demands could be made of other digital-currency companies if the IRS widens its investigation.
The case is U.S. v. Coinbase, 17-01431, U.S. District Court, Northern District of California (San Francisco).