The court has ordered Kraken to comply with the IRS’s request for user data for tax purposes

Kraken must disclose information regarding users involved in transactions reaching $20,000 in a calendar year.

The government wanted to see whether exchange users had underreported their tax obligations. Therefore, it requested access to user data.

Since Kraken allegedly ignored a summons from the IRS in 2021, the agency wants to look into the tax filing status of Kraken customers who made cryptocurrency trades between 2016 and 2020.

The presiding judge, Joseph Spero, rejected the IRS’s request for Kraken to disclose his or her place of work and financial support. The court flatly rejected several of the IRS’s demands.

According to the judge, while deciding whether or not to grant specific requests from the IRS, it is essential to determine whether or not the government’s summons is narrowly tailored because it only goes beyond what is required to achieve its stated goal.

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The court found that the first three requests were overbroad because they requested information beyond what most users would need to verify their identities to identify Kraken account holders under the “Doe” criteria.

The U.S. government has been cracking down on cryptocurrencies increasingly, and the verdict this past Friday sided with the government. The Securities and Exchange Commission (SEC) sued Coinbase and Binance in June, accusing them of operating an unlicensed exchange. The United States violated securities laws by mishandling client cash and misleading investors and authorities.

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