Lawsuit Initiated Against the IRS in the U.S. Regarding Regulations for DeFi Intermediaries
In the world of cryptocurrency, a significant legal battle is unfolding between the IRS and several industry groups, including the Blockchain Association, Texas Blockchain Council, and DeFi Education Fund. This lawsuit, which is still ongoing as of mid-2025, challenges the IRS's new rules requiring extensive cryptocurrency transaction details, including from decentralized finance (DeFi) actors.
The controversy surrounding these rules stems from several factors. For one, the impracticality and privacy concerns in DeFi, where identifiable counterparties sometimes do not exist to report, and requirements to disclose sensitive information such as sender details clash with DeFi's pseudonymous nature.
Moreover, there is active legal opposition to the IRS rules under the infrastructure law requiring crypto transaction reporting above $10,000. Other groups, like CoinCenter, have also filed lawsuits challenging the IRS rules as unconstitutional, which remain in court.
In response to implementation and compliance issues, the IRS has extended transitional relief and backup withholding tax reporting delays into 2026 and 2027, indicating ongoing regulatory adjustments tied to digital asset transaction reporting.
At the federal policy level, Congress formally disapproved the IRS’s original broker reporting rule on April 10, 2025, directing its removal from the Federal Register, showing pushback against strict IRS data demands from crypto intermediaries.
However, broader regulatory and legislative efforts, including the GENIUS Act and anticipated frameworks for stablecoins and digital assets, are evolving but have not resolved litigation regarding IRS enforcement of DeFi disclosure.
Meanwhile, a separate court case is being pursued by a couple of Tezos validators, aiming to force the IRS to revise taxation rules for staking income. Marisa Coppel, Head of Legal at the Blockchain Association, has stated that the government's actions are increasing risks and creating opportunities for inequality in DeFi.
The lawsuit also alleges that the proposed rules exceed the IRS's authority and infringe on the privacy of DeFi users. Coppel further stated that the government is imposing intermediaries where there are none in DeFi, and the plaintiffs argue that the proposed rules violate the U.S. Constitution and the Infrastructure Investment and Jobs Act.
It's worth noting that this is not the first legal action taken against the IRS regarding taxation rules for DeFi and staking income. The plaintiffs are advocating for the protection of DeFi technology, and the case remains active or pending without a final judgment or dismissal publicly reported as of August 2025.
In summary, the legal battle against the IRS's DeFi disclosure enforcement continues amid regulatory pushback, transitional relief extensions, and parallel legislative developments addressing crypto regulation. The outcome of this case could have significant implications for the future of DeFi and cryptocurrency regulation in the United States.
- Businesses and individuals in the DeFi industry are challenging the IRS's new rules in finance, arguing that these rules infringe on the technology's decentralized nature and pose privacy concerns.
- The ongoing lawsuit against the IRS's DeFi disclosure enforcement is a pivotal point in the regulation of digital asset technology within the United States, with potential implications for the future of DeFi and cryptocurrency business.
