IRS Broker Rule Faces Opposition! White House Backs S.J. Res. 3 Resolution

The White House has backed a joint resolution against the IRS Broker rule, a disputed regulation affecting DeFi. This decision supports Republican-led efforts to counter the rule’s influence on innovation, privacy, and compliance challenges in crypto. Key lawmakers are leading the opposition, fueling intense discussions among policymakers and the crypto industry. Many in the crypto space view this as a pivotal moment as the final outcome could reshape regulatory policies.

White House Sides with DeFi Against IRS Rule

The White House has announced its support for a joint resolution in an X-post by the crypto czar, David Sacks. The S.J. Res. 3 resolution seeks to oppose the IRS Broker rule that requires DeFi projects to collect extensive user information. This rule, which was released before Trump’s administration, would define any software that processes DeFi transactions as a broker. Additionally, this controversial law seeks to mandate all custodial brokers to report customer data to the Internal Revenue Service. 

The White House is pleased to announce its support for the CRA introduced by @SenTedCruz and @RepMikeCarey to rescind the so-called Broker DeFi Rule, an 11th hour attack on the crypto community by the Biden administration. pic.twitter.com/T7Hxasb4aC

— David Sacks (@davidsacks47) March 4, 2025

This law makes it so that DeFi platforms have to adhere to the rules that previously covered only traditional security brokers. As such, these platforms will be required to deliver Form 1099 tax returns to customers. These are payment reports that are not from typical employers and are used in cases like rent and gambling. Such requirements are only applied to “front-end service providers.”. This encompasses the platforms that provide access to DeFi protocols and not the protocols themselves.

Regulation or Overreach? DeFi’s Future in the U.S.

The joint opposing resolution was introduced by Texas Senator Ted Cruz and Ohio Representative Mike Carey. Ted Cruz stated that this resolution would overturn a rule that is targeting decentralized finance. The Texas Senator had also previously criticized this law in January. He had stated that this law would infringe on the privacy and security of Americans. He added that this law also disincentivizes innovation and cripples decentralized finance in the US.

White House also published an announcement about this new law. “This rule, issued as a midnight regulation in the final days of the previous Administration, would stifle American innovation and raise privacy concerns over the sharing of taxpayers’ personal information while imposing an unprecedented compliance burden on American DeFi companies.” This opposition from the Trump administration and Republican officials has also been called an effort to weaken the IRS. 

Privacy at Risk? The Debate Over User Data Collection

Naturally, there has also been a widespread backlash from the crypto community related to this change in crypto tax laws. Many question the practicality and privacy implications of this law. This is because, in the case of some crypto services like Uniswap, there is no clear way to collect user information. In some cases, this rule requires services to collect the name and address of a customer. However, no centralized entity has been named and mentioned that would collect such information. 

Carey’s Resolution Clears Key Congressional Hurdle

Ohio Representative Mike Carey’s resolution advanced from the U.S. House Ways and Means Committee last week. This resolution was advanced with 26 to 16 votes. To pass the congress, however, this resolution needs the full house vote. The White House has stated that If this resolution succeeds in Congress, the President’s senior advisors recommend signing it into law. 

Regulating DeFi Without Killing Innovation: Is It Possible?

Lawmakers and regulators must refine crypto tax laws without harming technological advancements. A better approach could involve customized reporting methods for DeFi instead of applying traditional finance rules. Nonetheless, If the resolution fails and the rule takes effect, DeFi platforms may need to change their models. As such, the outcome of this resolution will influence financial regulations for years. It will also shape both domestic policies and global approaches to decentralized finance.