U.S. Overturns IRS Crypto Tax Rule

In a rare bipartisan move, the U.S. Senate voted 70–28 to overturn a controversial IRS rule that would have dramatically expanded crypto tax reporting requirements. The resolution, already passed by the House, now awaits final approval by President Trump, who is expected to sign it into law.

The rule, introduced as part of the 2021 Infrastructure Investment and Jobs Act, redefined the term “broker” to include anyone “responsible for regularly providing any service effectuating transfers of digital assets.” Critics argued this was overly broad and could apply to miners, wallet developers, and DeFi platforms with no customer relationships.

Under the rule, such actors would have been required to file 1099 forms with the IRS, reporting user identities and transaction details. Industry leaders, legal scholars, and civil liberties groups warned that the requirements were technically impossible to comply with and would drive developers offshore or into legal jeopardy.

The repeal of this rule is more than a win for crypto—it’s a pivotal moment for how the U.S. will shape digital asset taxation. Lawmakers who supported the repeal emphasized that the IRS cannot regulate what it cannot define clearly. The blockchain does not operate like a traditional brokerage system, and its participants are often pseudonymous, autonomous, or even non-human (smart contracts).

This development also reopens the conversation around how to tax digital assets fairly. The IRS has long struggled to keep pace with innovation, and many crypto investors are still unsure how to report staking rewards, NFT trades, and DAO earnings. With the repeal, Congress has signaled it wants a more nuanced and future-proof approach.

The repeal does not eliminate tax obligations. Capital gains, income from mining, and other profits remain taxable. But it does spare a wide swath of developers and validators from burdensome reporting rules that never fit their role in the ecosystem.

From a legal advisory perspective, this shift underscores the importance of proactive engagement with regulators. The crypto industry succeeded here not just by complaining—but by organizing, educating lawmakers, and proposing workable alternatives.

Looking forward, new legislation is likely to replace the repealed rule. Several senators are working on proposals that would limit the broker definition to custodial exchanges and centralized services. This would create a safer, more compliant environment for developers while still enabling the IRS to collect accurate information from relevant parties.

For now, the message is clear: technology-neutral, innovation-friendly tax policy is possible. This repeal may also set the tone for broader reforms to how digital assets are taxed, reported, and regulated in the United States.