Sixth Circuit revived challenge to crypto transaction reporting law

The U.S. Court of Appeals for the Sixth Circuit on August 9, 2024 revived most of a constitutional challenge to federal reporting rules for large digital-asset receipts. In *Carman v. Yellen*, No. 23-5662, the three-judge panel held that plaintiffs including Coin Center had standing and that their enumerated-powers, First Amendment and Fourth Amendment claims were ripe for review. It sent those claims back to the Eastern District of Kentucky.

The ruling mattered because it allowed a dispute over cryptocurrency privacy and federal tax-reporting power to reach the merits. It did not hold the reporting law unconstitutional, block enforcement, or decide that cryptocurrency transactions are protected from disclosure. The appellate decision was about whether the plaintiffs could litigate those questions at all.

What the court decided

Congress amended 26 U.S.C. § 6050I through the Infrastructure Investment and Jobs Act of 2021. The change added “digital assets” to the provision’s definition of cash. Section 6050I generally requires a person engaged in a trade or business who receives more than $10,000 in cash in one transaction, or related transactions, to report information including the payer’s name, address and taxpayer identification number, along with the amount, date and nature of the transaction.

Dan Carman, Coin Center, Raymond Walsh and Quiet Industries Corp. sued the Treasury Department, Internal Revenue Service and other federal defendants in 2022. They alleged that applying the reporting system to cryptocurrency would compel sensitive disclosures, burden private transactions and exceed Congress’s constitutional authority. A district judge dismissed the case on standing and ripeness grounds in July 2023.

The Sixth Circuit partly reversed that dismissal. Judge Karen Nelson Moore wrote that the plaintiffs alleged they would be directly subject to the reporting mandate and would incur compliance costs. At the motion-to-dismiss stage, those allegations were enough to establish injury for the three claims returned to the district court.

The panel drew careful boundaries. It said the plaintiffs could pursue narrower First and Fourth Amendment theories focused on the initial compelled disclosure of transaction information. More speculative theories about how officials might later analyze public ledgers or uncover unrelated activity were not ready for review on the pleaded record. The court also left the plaintiffs’ Fifth Amendment vagueness theory unripe while regulations remained pending, and it did not revive their self-incrimination theory.

A law in force, but reporting deferred

The timing was unusual. The statutory amendments applied to returns required after December 31, 2023. Yet Treasury and the IRS had not completed regulations specifically implementing Section 6050I for digital assets.

IRS Announcement 2024-4, issued on January 16, 2024, said businesses did not have to count digital assets toward the more-than-$10,000 threshold until Treasury and the IRS published implementing regulations. The agency emphasized that ordinary cash reporting continued and that the transitional treatment did not alter income-tax obligations involving digital assets.

That administrative pause did not eliminate the lawsuit. The Sixth Circuit found the enumerated-powers question to be a legal issue that was ripe once Congress enacted the amendment. It also concluded that pending rules did not prevent review of the narrower disclosure-based First and Fourth Amendment claims.

What remained unresolved on August 9

The plaintiffs won a route back into court, not a final judgment against Section 6050I. The district court still had to examine the surviving constitutional claims on their merits, and forthcoming regulations could affect how the digital-asset reporting regime would operate. As of August 9, 2024, the IRS transition meant digital assets were excluded from the Section 6050I threshold calculation pending those rules. The appellate decision changed the litigation posture; it did not change cryptocurrency prices, establish a new reporting form, or settle the constitutional limits of federal transaction reporting.