IRS Faces Legal Challenge over Defi Brokerage Regulations in the United States
In a significant move, a lawsuit has been filed against the Internal Revenue Service (IRS) by the Blockchain Association, Texas Blockchain Council, and DeFi Education Fund. The lawsuit, which was filed in 2025, aims to contest the IRS's proposed rules for DeFi data disclosure.
At the heart of the dispute is the argument that the proposed rules exceed the IRS's authority and violate the Infrastructure Investment and Jobs Act, the U.S. Constitution, and the privacy rights of DeFi users. Marisa Coppel, Head of Legal at the Blockchain Association, has been vocal in her advocacy, stating that the government's actions are increasing risks and creating opportunities for inequality in DeFi.
The lawsuit also alleges that the proposed rules infringe on the privacy of DeFi users. This concern stems from the requirement for DeFi platforms to report customer trades for tax purposes, a requirement that many argue could potentially expose sensitive financial information.
However, as of August 2025, the status of this lawsuit does not appear to have a recent public update or resolution. Searches for information on the lawsuit's progress have yielded no results, suggesting that the case may still be ongoing.
Despite the lack of updates on the aforementioned lawsuit, related developments indicate that the IRS's DeFi data disclosure rule enforcement has faced legal and legislative pushback. One such development is the joint resolution passed by Congress in April 2025, which disapproved the IRS rule titled “Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales.” This rule had required DeFi platforms and others to report customer trades for tax purposes via Form 1099-DA.
Additionally, the IRS issued Notice 2025-33, which extended transitional relief for brokers regarding backup withholding on digital asset transactions, effectively easing enforcement for 2026 and 2027.
Despite these developments, the IRS has shown firmness in its efforts to access crypto records. For example, the U.S. Supreme Court declined to hear a challenge to the IRS’s authority to summon Coinbase records, upholding the IRS's summons power over third parties.
In conclusion, the IRS rule targeted by these groups was formally disapproved by Congress and rescinded, and the IRS granted some compliance relief. However, the precise status of the lawsuit filed by the Blockchain Association, Texas Blockchain Council, and DeFi Education Fund against the IRS remains unclear, with no public updates available as of mid-2025. This ongoing legal battle underscores the complexities and uncertainties surrounding DeFi regulations and crypto taxation in the United States.
[1] Link to the joint resolution disapproving the IRS rule [2] Link to the U.S. Supreme Court's decision [3] Link to Notice 2025-33
- The ongoing lawsuit filed by the Blockchain Association, Texas Blockchain Council, and DeFi Education Fund in 2025 challenges the proposed rules for DeFi data disclosure by the IRS, arguing they exceed the IRS's authority, violate privacy rights of DeFi users, and opposing the requirement for DeFi platforms to report customer trades for tax purposes.
- The IRS's enforcement of DeFi data disclosure rules has faced pushback, as evidenced by the joint resolution passed by Congress in April 2025 disapproving an IRS rule for digital asset sales reporting, and the IRS's issuance of Notice 2025-33, extending transitional relief for brokers regarding backup withholding on digital asset transactions.
