Legal Action Initiated Against IRS over DeFi Intermediary Regulations
In the ever-evolving world of Decentralised Finance (DeFi), recent developments have highlighted a series of legal challenges and regulatory changes.
Marisa Coppel, Head of Legal at the Blockchain Association, has voiced concerns about the government's actions, stating they are increasing risks and creating opportunities for inequality in DeFi. Coppel also expressed the need to protect DeFi technology, not destroy it.
One of the most significant developments is the Congressional disapproval of the IRS's controversial rule requiring DeFi exchanges and other crypto service providers to file Form 1099-DA. This rule, which aimed to report customer trade information, was formally disapproved by Congress via a joint resolution in April 2025. The resolution was signed into law by former President Trump, directing the IRS and Treasury to remove the rule from the Federal Register.
The IRS has responded by extending transitional relief related to digital asset backup withholding requirements through 2026 and 2027, signalling ongoing adjustments to enforcement timing and compliance burdens.
The landscape for DeFi and digital assets regulation is also rapidly evolving at the legislative and regulatory agency level. New laws like the GENIUS Act provide a federal framework for stablecoins, while broader efforts by the SEC and CFTC aim to clarify rules around digital assets and markets.
However, legal challenges around IRS authority and privacy related to cryptocurrency data persist. For instance, the Supreme Court’s August 2025 decision not to hear a challenge to IRS summons authority concerning Coinbase records highlights ongoing judicial deference to the IRS in enforcement matters.
Given these points, the direct lawsuit involving the Blockchain Association, Texas Blockchain Council, and DeFi Education Fund has not been reported as resolved or progressed distinctly from the broader regulatory context by August 2025. It suggests the lawsuit either remains pending without public updates or its core issue (the Form 1099-DA requirement for DeFi platforms) has been effectively neutralized by legislative intervention.
In a separate court case, Tezos validators are pursuing action against the IRS to revise taxation rules for staking income. The plaintiffs claim that the proposed rules violate the U.S. Constitution and the Infrastructure Investment and Jobs Act. They also allege that the data collection from DeFi users infringes on privacy and exceeds the IRS's authority.
These legal battles and regulatory shifts underscore the complex and evolving nature of DeFi regulation in the United States, with ongoing debates around privacy, authority, and the appropriate role of government in this new and rapidly growing sector.
Read also:
- Interview with Jimmy Mesta, Co-Founder and CTO of RAD Security, on the Real-Time Defense Company
- Transformation of Small Business Operations Accelerated with $4 Million Investment in Agentic AI by UgenticAI
- Decline in Bitcoin Deposits to Digital Currency Platforms Drops to 2016 Minimums
- Rising Pi Network (PI) Values: Weekly Increase of 13%, Anticipating Further Gains?
