US Senate Strikes Down IRS’s Controversial DeFi Broker Rule – What’s Next?

In a significant move, the U.S. Senate voted 70-28 on March 26 to rescind the controversial DeFi broker mandate that aimed to apply tax-required reporting to decentralized finance (DeFi) firms.  This mandate was proposed first by the IRS and then the U.S. Treasury Department, and was at first proposed in August of 2022 and finalized in December of 2024, which proposed that DeFi platforms report users’ transactions or measurements of gross proceeds of crypto sales to the IRS, akin to how traditional brokers do now.

Bipartisan Support for Repeal

The decision to overturn the rule was bipartisan in both the House and Senate. The House of Representatives voted on the resolution earlier this month, with most lawmakers expressing concerns about its implications. Republican Rep. After the Senate endorsed the bill, the resolution proceeded to Donald Trump’s desk, awaiting final approval. The White House crypto and AI adviser, David Sacks, has earlier suggested that the administration favors repealing the act, and as a result, there are very strong chances of Trump signing the act into law.

Privacy and Innovation Concerns

The DeFi broker rule, if adopted, would have asked platforms to report and gather individual user information tied to cryptocurrency transactions. It was argued by its critics that asking for this to be reported was counterintuitive to decentralization, overloading platforms that commonly do not have a central controller with undue regulation. DeFi proponents feared such onerous reporting obligations would send blockchain development overseas, to the detriment of the U.S. digital assets industry.

Those advocating for the repeal pointed out that the rule was unworkable and unenforceable as it stood. DeFi platforms, unlike traditional financial institutions, function in a decentralized environment with little or no intermediaries. Requiring them to adhere to broker-like tax reporting requirements was deemed an unrealistic demand that would prompt many of the platforms to close down or move to friendlier crypto jurisdictions. 

Legal Challenges Against the IRS

The rule’s broadening of the definition of a ‘broker’ had already encountered considerable legal resistance. The Blockchain Association, a leading digital asset advocacy organization, and the Texas Blockchain Council sued the IRS last year. Marisa Coppel, Head of Legal at the association, was strongly against the rule, arguing that regulators had overstepped their statutory powers in expanding the definition of brokers to cover decentralized platforms.

In a joint statement, Coppel underscored that aside from being an invasion of people’s right to privacy, the rule would have driven the fast-expanding DeFi sector offshore. Critics cautioned that such overreach by regulators would have long-term adverse impacts on America’s leadership in blockchain technology and decentralized finance.

Conclusion

With both the House and Senate supporting the repeal, the DeFi community now waits with bated breath for Trump’s ultimate decision. With the administration being supportive, the repeal is likely to become law shortly.