Blockchain Organizations Challenge New Broker Reporting Regulation

Three key organizations advocating for blockchain have initiated a lawsuit against the Internal Revenue Service regarding its newly established broker reporting requirements.

The groups claim that these regulations may significantly affect the U.S. digital asset space, especially in the realm of decentralized finance (DeFi).

The Blockchain Association, DeFi Education Fund, and Texas Blockchain Council have collectively lodged this legal challenge in the U.S. District Court for the Northern District of Texas.

They argue that the final “broker” rule established by the IRS and Treasury Department oversteps its jurisdiction.

The lawsuit particularly critiques the broadened definition of “broker” to encompass providers of DeFi trading front-end services, even though these entities do not directly facilitate transactions.

Kristin Smith, CEO of the Blockchain Association, described the broker rule as “unconstitutional,” contending that it constitutes a violation of the Administrative Procedure Act by the IRS.

As noted by the Head of Legal at the Blockchain Association, Marisa Coppel, this regulatory overreach “would push this entire, burgeoning technology offshore,” while also violating the privacy rights of individuals utilizing decentralized technology.

Miller Whitehouse-Levine, CEO of the DeFi Education Fund, expressed strong disapproval regarding both the timing and reach of the regulation. He referred to it as “midnight rulemaking” that threatens financial innovation.

The organization underscored DeFi’s capacity to enhance the accessibility, efficiency, and consumer-centric nature of financial services.

Lee Bratcher, President of the Texas Blockchain Council, pointed out the impracticality of meeting these compliance requirements, stating that many players in the decentralized ecosystem lack access to the information the IRS now mandates.

“This regulatory overreach risks driving critical development overseas, jeopardizing U.S. competitiveness in the digital economy,” Bratcher warned.

This legal action follows persistent warnings from various stakeholders during the public comment period regarding the possible adverse effects on the digital asset industry. Earlier reports by Crypto.news also indicated that DeFi advocates were prepared to take strong measures against IRS policies.



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