- The lawsuit opposes regulations that expand the definition of brokers to include DeFi platforms.
- IRS recently proposed that brokers report gross proceeds from cryptocurrency transactions.
The U.S. cryptocurrency industry is waging a high-stakes legal battle against the IRS, citing concerns over privacy, innovation, and the future of decentralized finance (DeFi).
The lawsuit, led by the Blockchain Association and Texas Blockchain Council, challenges new broker reporting requirements set to take effect in 2027. These rules expand the definition of brokers to include DeFi platforms, potentially driving innovation offshore and imposing heavy compliance burdens on software developers.
The IRS finalized the regulations on December 27, mandating brokers to report gross proceeds from cryptocurrency transactions. Unlike earlier rules that targeted centralized exchanges, these requirements extend to decentralized platforms and software developers involved in transaction facilitation.
DeFi platforms, which operate without centralized control, now risk being classified as brokers under the IRS’s expanded definition. The broader implications are significant. The rules would affect up to 875 brokers and 2.6 million U.S. taxpayers, forcing decentralized platforms to collect and report sensitive transaction data by 2026.
See Related: US Taxman Introduces New Crypto Tax Rules For 2025
Lawsuit And Blockchain Developers
The lawsuit comes amid heightened scrutiny of blockchain developers globally. Earlier this year, Alex Pertsev, a Tornado Cash developer, was convicted of money laundering for enabling illicit transactions through non-custodial cryptocurrency mixing services. The Blockchain Association points to such cases as evidence of increasing legal pressures on developers who merely create software tools.
The legal battle also has political undertones. While the Biden administration defends the regulations as a step toward financial transparency, pro-crypto advocates, including former President Donald Trump and some GOP allies, have vowed to roll back such measures.
The lawsuit signals an escalating conflict between regulators and the crypto industry, with profound implications for privacy, technological advancement, and market competitiveness.
The Blockchain Association’s lawsuit against the IRS may be the first of many as crypto advocates continue to challenge regulatory overreach. It comes as the industry braces for a protracted legal fight in an outcome that could shape decentralized finance in the U.S.
