2/ This rule mandates providers of “trading front-end services,” which would include providers of DeFi front-ends and wallet software with trading functionality, comply with tax laws pertaining to brokers – i.e., these participants must furnish 1099s.

— Marisa Tashman Coppel (@MTCoppel) December 28, 2024

4/ These software providers will need to collect and report transaction data and personal information. These providers are not traditional intermediaries and they do not have “customers” like brokers.

— Marisa Tashman Coppel (@MTCoppel) December 28, 2024

6/ DeFi enables users to participate in a more equitable financial system. But the government is now forcing intermediaries where none exist, creating more risk and more opportunity for inequity. We need to protect DeFi technology, not destroy it.

— Marisa Tashman Coppel (@MTCoppel) December 28, 2024

8/ We are hopeful that the court will agree and repeal this rule.

[end]

— Marisa Tashman Coppel (@MTCoppel) December 28, 2024

On December 27, 2024, the DeFi Education Fund, the Blockchain Association, and the Texas Blockchain Council filed a lawsuit in the U.S. District Court for the Northern District of Texas, challenging the Internal Revenue Service’s (“IRS”) and Treasury Department’s final “broker” midnight rulemaking on the basis that the rulemaking exceeds the agencies’ statutory authority, violates the Administrative Procedure Act (“APA”), and is unconstitutional.

During the rule’s comment period, the public warned the IRS and Treasury that moving forward with the rule would cripple the digital asset industry. But the government ignored this feedback, leaving the digital asset sector with a rule that puts unlawful compliance burdens on software developers who build so-called “trading front-end services.”  This midnight rule will stifle innovation and burden American entrepreneurs—if it stands.

“The IRS and Treasury have gone beyond their statutory authority in expanding the definition of “broker” to include providers of DeFi trading front-ends even though they do not effectuate transactions,” said Marisa Coppel, Head of Legal, Blockchain Association. “Not only is this an infringement on the privacy rights of individuals using decentralized technology, it would push this entire, burgeoning technology offshore. Blockchain Association continues to stand with the innovators and users of DeFi, and will continue to fight this misguided rulemaking to ensure the United States remains a home for decentralized finance technology and developers alike.”

“We are incredibly disappointed in today’s decision by the Treasury and the IRS to finalize the misguided and unfairly sweeping DeFi portion of their ‘broker’ rulemaking in a year-end, ‘midnight rulemaking,’” said Miller Whitehouse-Levine, Chief Executive Officer, DeFi Education Fund. “Decentralized Finance promises to make financial services and the digital economy more accessible, efficient, interoperable, dependable, and consumer-focused — this promise is at the heart of our work at the DeFi Education Fund. This unfortunate rulemaking is a direct threat to financial innovation, and we intend to fight it using every tool available to us.”

“The new IRS broker rule imposes unrealistic expectations on the digital asset ecosystem,” said Texas Blockchain Council President Lee Bratcher. “The rule fails to recognize the decentralized nature of this technology, where many actors simply do not have access to the information the IRS is now demanding. This regulatory overreach risks driving critical development overseas, threatening US competitiveness in the digital economy.”

Source: Blockchain Association