US House Rejects Controversial IRS Crypto Rule

The US House of Representatives has passed a resolution to repeal the IRS's tax rule on crypto platforms, with overwhelming bipartisan support.

The House of Representatives shares the same view

The US House of Representatives has passed a resolution to repeal the controversial Internal Revenue Service (IRS) tax rule that requires cryptocurrency brokers to collect and report user transaction data.

“Today is an important milestone in the regulation of digital assets in the United States. With *bipartisan supermajority* support from 292 House Members recognizing the significant flaws in the Treasury and IRS’s 'broker' rulemaking, the U.S. is taking a significant positive…

— DeFi Education Fund (@fund_defi) March 11, 2025

The resolution received support from 291 lawmakers, more than enough to be considered a “bipartisan supermajority,” meaning members of both parties support removing the regulation.

However, the legislative process is not yet over. Although the Senate previously approved the resolution by a 70-28 vote, it still has to return to the Senate again due to a budget provision, before being sent to President Donald Trump for signing into law.

Tax provisions

The IRS regulation was originally set to take effect in 2025 but has been delayed until 2026.

Accordingly, the legal framework requires decentralized finance (DeFi) platforms and some crypto-related service providers to send 1099 tax forms to customers. This is a form used to report non-wage income, such as gambling winnings, rent, royalties, and other income.

The Treasury has clarified that the rule does not target pure decentralized blockchain protocols, but only front-end service providers, which are websites or applications that help users access DeFi protocols. This means decentralized exchanges (DEXs), DeFi lending platforms, or wallet providers could be affected.

However, many crypto industry experts are concerned that the rule could impose liability on entities that do not have the ability to collect transaction data, such as open-source protocol developers or node operators in the DeFi ecosystem.

The US Blockchain Association and two other organizations filed a lawsuit against the IRS shortly after the rule was announced. They argue:

This regulation is not feasible for decentralized protocols, since DeFi platforms do not control user transactions like traditional centralized exchanges (CEXs).

Collecting personal information would affect privacy, which goes against the principles of decentralization and security that crypto aims for.

The regulation could push the blockchain industry overseas, reducing the US's competitiveness in the digital asset sector.

Who supports reversing the IRS regulation?

The resolution, proposed by Rep. Mike Carey (R-Ohio) and Sen. Ted Cruz (R-Texas), quickly gained support from Republicans and some Democrats. Supporters of the resolution argue that IRS regulations are a major barrier to innovation in the crypto sector in the US.

In his speech on the House floor, Mike Carey asserted:

"Repealing this rule is necessary to prevent the disaster caused by the IRS and ensure that the United States can lead the world in digital asset and cryptocurrency technology."
✅ Passed! ✅

The House just passed my bill to repeal the IRS DeFi Broker Rule in a strong, bipartisan fashion.

Now we need to get it on @POTUS's desk and signed into law. pic.twitter.com/lCWAjICPJV

— Congressman Mike Carey (@RepMikeCarey) March 11, 2025

The Trump administration has also publicly supported the resolution. According to David Sacks, White House Crypto and AI Advisor, President Trump will sign the bill into law as soon as it is introduced. The Trump administration stated:

"This rule, issued in the waning days of the previous administration, stifles innovation in America, imposes unprecedented compliance burdens, and threatens consumer privacy."

The Trump administration's support, along with overwhelming votes from the House and Senate, suggests the rule is likely to be repealed altogether.

Democrats Divided

While Republicans overwhelmingly supported the resolution, some Democrats also sided with them. They included Senate Minority Leader Chuck Schumer and Sen. John Fetterman, who also supported repealing an SEC rule related to digital assets.

However, not all Democrats were on board. Some still opposed the resolution, accusing Republicans of trying to weaken the IRS.

Rep. Richard Neal (D-Mass.) criticized Republicans for repeatedly cutting the IRS budget, which would reduce the government’s ability to collect taxes.

Rep. Danny Davis (D-Ill.) vetoed the resolution, fearing it could add $4 billion to the U.S. deficit by reducing tax collection from non-compliant taxpayers.

Next Steps

Previously, many sources said that the resolution would immediately go to Trump for his signature. However, according to a new update on March 11, the resolution must go back to the Senate again before it reaches the White House. The reason is that the resolution is bundled with a budget provision, requiring it to be reviewed by the Senate. This could cause some delays, but with the overwhelming support, it is likely to clear the final hurdle and become law in the coming weeks. If Trump signs it, it would be a major victory for the crypto industry and could foster a more open regulatory environment for companies operating in the space