Three prominent blockchain advocacy organizations have filed a lawsuit challenging the Internal Revenue Service’s new broker-dealer reporting requirements.
The organizations say the rules could have serious consequences for the US digital assets sector, particularly decentralized finance (DeFi).
The Blockchain Association, the DeFi Education Fund, and the Texas Blockchain Council jointly filed a legal challenge in the U.S. District Court for the Northern District of Texas.
They argued that the IRS and Treasury Department’s final “broker” regulations exceeded their authority.
The lawsuit specifically targets expanding the definition of “broker” to include DeFi trading front-end service providers, although these entities do not directly facilitate transactions.
Blockchain Association CEO Kristin Smith called the broker rule “unconstitutional,” alleging that the IRS is violating the Administrative Procedure Act.
According to Marisa Coppel, head of legal at the Blockchain Association, this overreach would “push all this booming technology overseas” while infringing on the privacy rights of individuals using decentralized technology.
Miller Whitehouse-Levine, CEO of the DeFi Education Fund, expressed strong disappointment with the timing and scope of the regulations. Miller called this “midnight regulation” that threatens financial innovation.
The organization highlighted the potential of DeFi to make financial services more accessible, efficient and consumer-focused.
Texas Blockchain Council President Lee Bratcher highlighted the practical impossibility of compliance. He said many players in the decentralized ecosystem simply cannot access the information now required by the IRS.
“These regulatory excesses risk leading to critical overseas development, threatening U.S. competitiveness in the digital economy,” Bratcher said.
The legal challenge comes after many stakeholders warned during the public comment period about potential negative impacts on the digital assets sector. Crypto.news previously reported that DeFi supporters had promised aggressive action against the IRS policies.
