U.S. House Votes to Overturn IRS DeFi Broker Rule
In a significant move, the U.S. House of Representatives has voted overwhelmingly to overturn an IRS rule that classified crypto entities as brokers. This rule mandated that these entities collect specific taxpayer and transaction information, which included requirements for decentralized finance (DeFi) platforms. The resolution was passed with a bipartisan vote of 292 to 132, signaling a unified reluctance among lawmakers to impose stringent regulations on the burgeoning crypto industry.
The resolution, advancing under the Congressional Review Act, echoes a similar sentiment that emerged from the U.S. Senate, where a previous vote saw 70 Senators favoring its repeal. The proposed action aims to reverse a rule finalized shortly before the conclusion of President Joe Biden’s administration, which many lawmakers argued could hinder innovation and impose unreasonable burdens on businesses operating in the digital asset space.
Republican Representative Jason Smith from Missouri spearheaded the call for action against the IRS rule. He cautioned that it risked stifling burgeoning businesses within the U.S. crypto sector. “There are real questions that the rule can ever even be administered,” he stated, emphasizing that DeFi exchanges operate differently than centralized exchanges, making compliance with such regulations nearly impossible. Smith further noted that DeFi platforms lack the capacity to collect the required information from users to comply with these IRS stipulations.
However, there’s been division among lawmakers regarding the implications of the proposed repeal. Illinois Democrat Danny Davis contended that the IRS rule was consistent with the expectations set forth in the bipartisan Infrastructure Investment and Jobs Act of 2021. He drew parallels with traditional stock transactions, arguing that broker reporting facilitates accurate income reporting to the IRS, which could enhance tax compliance.
North Carolina Republican Tim Moore echoed concerns that the original intent of the 2021 legislation was being eclipsed by the IRS’s regulatory approach. He remarked that the current rule places undue burdens on developers engaged in digital asset innovation, ultimately threatening U.S. leadership in this sector. Meanwhile, Texas Democrat Lloyd Doggett warned that the resolution might pave the way for exploitation by wealthy tax evaders and illicit actors, raising fears that it could negatively impact national fiscal health, potentially adding $4 billion to the national debt.
This legislative action unfolded alongside a House vote on a continuing resolution aimed at funding the government through September 30, 2025, which narrowly passed with a vote of 217 to 213. The ongoing debates surrounding these issues reflect the broader tensions within Congress regarding the regulation of digital assets and the balance between fostering innovation and ensuring compliance and transparency in financial dealings.
The path forward remains uncertain, as further votes are needed in the Senate due to existing budget rules. If the resolution clears this hurdle and receives President Trump’s signature, it could establish a precedent that could foreshadow the IRS’s ability to enforce similar rules in the future. The evolving regulatory landscape will likely continue to be a contentious issue as lawmakers seek to navigate the complexities of cryptocurrency and its implications for the economy.
