United States v. Richard Gratkowski
(2020)
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Rule of Law:
An individual does not have a reasonable expectation of privacy under the Fourth Amendment in their Bitcoin transaction records, either on the public blockchain or when held by a third-party virtual currency exchange, because such information is voluntarily conveyed to third parties.
Facts:
- Richard Gratkowski used Bitcoin, a virtual currency, to pay for access to a child-pornography website.
- Bitcoin transactions, which show the sender's address, the receiver's address, and the amount transferred, are recorded on a publicly accessible digital ledger called the blockchain.
- While Bitcoin addresses are anonymous on the blockchain, analysis of the public transaction history can potentially reveal the owner's identity.
- Gratkowski conducted his transactions using a third-party virtual currency exchange called Coinbase.
- Federal agents began investigating the child-pornography website that Gratkowski used.
- Using an outside service, agents analyzed the public Bitcoin blockchain to identify a "cluster" of Bitcoin addresses controlled by the website.
Procedural Posture:
- The Government charged Gratkowski in the U.S. District Court for the Western District of Texas with receiving and accessing child pornography.
- Gratkowski filed a motion to suppress evidence found via the search warrant, arguing the blockchain analysis and the subpoena to Coinbase were unconstitutional searches.
- The district court (the trial court) denied Gratkowski's motion to suppress.
- Gratkowski entered a conditional guilty plea, which allowed him to appeal the district court's denial of his motion.
- Gratkowski (Appellant) appealed the district court's final judgment to the United States Court of Appeals for the Fifth Circuit, with the United States as the Appellee.
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Issue:
Does an individual have a reasonable expectation of privacy under the Fourth Amendment in their Bitcoin transaction records, both on the public blockchain and when held by a third-party virtual currency exchange like Coinbase?
Opinions:
Majority - Haynes, Circuit Judge
No, an individual does not have a reasonable expectation of privacy under the Fourth Amendment in their Bitcoin transaction records. Applying the third-party doctrine, information voluntarily turned over to a third party generally loses its Fourth Amendment protection. The court distinguished this case from Carpenter v. United States, which found a privacy interest in cell-site location information (CSLI), by reasoning that Bitcoin records are more analogous to the bank records in United States v. Miller. First, regarding the public blockchain, the information is limited (sender address, receiver address, amount) and its public nature is a well-known feature of the system. Unlike the passive, comprehensive collection of CSLI, creating a Bitcoin transaction is an affirmative act. Second, regarding records held by Coinbase, the court found Coinbase functions as a financial institution similar to a bank. By using its services, Gratkowski voluntarily conveyed his transaction data to Coinbase, making them business records rather than private communications. This information does not provide the 'intimate window into a person’s life' that CSLI does, and using an exchange is an optional, affirmative choice, not an indispensable feature of modern life.
Analysis:
This decision solidifies the application of the traditional third-party doctrine to the novel technology of cryptocurrency, declining to extend the Supreme Court's narrow exception from Carpenter. By analogizing virtual currency exchanges to traditional banks, the court signals that financial transaction data, regardless of its form, generally lacks a reasonable expectation of privacy when shared with an intermediary. This ruling provides law enforcement a clear legal basis to obtain cryptocurrency transaction records from exchanges using subpoenas rather than requiring a warrant, significantly impacting investigations involving digital currencies.
