Three leading blockchain advocacy groups have initiated a lawsuit contesting the Internal Revenue Service’s newly implemented broker reporting requirements.
The organizations claim that these regulations could significantly affect the U.S. digital asset industry, especially in the realm of decentralized finance (DeFi).
The Blockchain Association, DeFi Education Fund, and Texas Blockchain Council collectively filed the legal suit in the U.S. District Court for the Northern District of Texas.
They argued that the IRS and Treasury Department’s final “broker” rulemaking exceeds their statutory authority.
The lawsuit particularly targets the rule’s broadened definition of “broker” to encompass providers of DeFi trading front-end services, despite the fact that these entities do not directly execute transactions.
The CEO of the Blockchain Association, Kristin Smith, termed the broker rule as “unconstitutional,” asserting that the IRS is breaching the Administrative Procedure Act.
As per the Head of Legal at the Blockchain Association, Marisa Coppel, this regulatory overreach “would push this entire, burgeoning technology offshore” while also trespassing on the privacy rights of individuals utilizing decentralized technology.
DeFi Education Fund CEO Miller Whitehouse-Levine expressed significant dismay over the timing and breadth of the regulation, labeling it as “midnight rulemaking” that jeopardizes financial innovation.
The organization reiterated DeFi’s potential to enhance the accessibility, efficiency, and consumer-centric nature of financial services.
Texas Blockchain Council President Lee Bratcher underscored the practical impossibility of compliance, arguing that many participants in the decentralized ecosystem lack the necessary information currently mandated by the IRS.
“This regulatory overreach risks driving critical development overseas, jeopardizing U.S. competitiveness in the digital economy,” stated Bratcher.
The legal action follows warnings from numerous stakeholders during the public comment period regarding the possible adverse effects on the digital asset sector. Crypto.news had previously reported that DeFi advocates had pledged to take decisive action against the IRS policies.
