US Senate Passed Resolution Nullifying the IRS on Defi Broker Rule

The U.S. Senate passed a resolution under the Congressional Review Act (CRA) to nullify the Internal Revenue Service’s (IRS) Decentralized Finance (DeFi) broker rule, with a vote of 70 to 28. This bipartisan decision marks the second time the Senate has approved such a measure, following an earlier vote on March 4, 2025, by a margin of 70 to 27. Due to constitutional requirements regarding budget-related legislation originating in the House, the House of Representatives passed its own version of the resolution on March 11, 2025, with a vote of 292 to 132, prompting the Senate to vote again.

The IRS DeFi broker rule, finalized in December 2024 during the final days of the Biden administration, aimed to expand tax reporting requirements by classifying certain DeFi platforms as “brokers.” This would have obligated them to collect, and report detailed transaction and taxpayer information, similar to traditional financial institutions. Critics, including lawmakers and crypto industry advocates, argued that the rule was impractical due to the decentralized nature of DeFi, where platforms often lack the infrastructure to gather such data. They also contended that it threatened innovation and privacy, potentially driving DeFi development overseas.

The resolution, led by Senator Ted Cruz (R-Texas) and Representative Mike Carey (R-Ohio), received significant bipartisan support, reflecting a broader push to reduce regulatory burdens on the crypto sector. Following the Senate’s latest vote, the measure now heads to President Donald Trump’s desk, where it is expected to be signed into law, given prior indications of support from the White House, including from AI and crypto czar David Sacks.

If enacted, the CRA will not only repeal the rule but also prevent the IRS from issuing similar regulations in the future. This development is seen as a significant victory for the DeFi and broader cryptocurrency industry, reinforcing the U.S. as a hub for financial innovation while highlighting ongoing tensions between regulatory oversight and technological advancement.

The U.S. Senate’s passage of the CRA to nullify the IRS DeFi broker rule is likely to have a notable impact on cryptocurrency regulation, both in the short term and over the longer horizon. The repeal removes immediate pressure on DeFi platforms to comply with burdensome tax reporting requirements. These platforms, which often operate without centralized control or the ability to collect detailed user data, would have struggled to meet the IRS’s broker definition. This decision provides operational clarity and reduces compliance costs for the industry. The bipartisan support and expected presidential approval signal a pro-innovation stance from the U.S. government.

This could spur increased investment and participation in DeFi and the broader crypto market, as businesses and developers perceive a more favorable regulatory environment. With the CRA barring the IRS from reissuing a similar rule, the agency may need to pivot its strategy for taxing crypto transactions. This could delay broader crypto tax enforcement efforts, giving the industry breathing room while new approaches are developed.

This successful use of the CRA sets a precedent for challenging other crypto-related regulations perceived as overreach. It demonstrates that Congress is willing to intervene when agencies like the IRS or SEC impose rules that clash with the sector’s decentralized ethos, potentially emboldening lawmakers to scrutinize future regulations. By rejecting rules that critics argued would push DeFi development offshore, the U.S. strengthens its position as a global leader in crypto innovation. This could attract talent, capital, and projects that might otherwise have migrated to jurisdictions with lighter regulatory touch, such as Singapore or Switzerland. The repeal highlights the limitations of applying traditional financial frameworks to decentralized systems, amplifying calls for tailored crypto legislation. Lawmakers may accelerate efforts to craft a cohesive regulatory framework that balances innovation, consumer protection, and tax compliance—something the industry has long sought. The decision could complicate alignment with international tax norms, such as those from the OECD, which push for greater transparency in crypto transactions.

If other countries adopt stricter DeFi reporting rules, U.S.-based platforms might face challenges operating globally, potentially creating a regulatory patchwork. The move aligns with a growing pro-crypto sentiment in Washington under the Trump administration, evidenced by figures like David Sacks advocating for lighter-touch policies. It contrasts with the Biden-era approach, which leaned toward stricter oversight. However, it doesn’t eliminate all regulatory uncertainty—issues like securities classification (under the SEC’s purview) and anti-money laundering rules (via FinCEN) remain unresolved and could still shape the crypto landscape.
In essence, nullifying the IRS DeFi broker rule is a deregulatory win that boosts DeFi’s growth prospects in the U.S. while underscoring the need for a more nuanced, crypto-specific regulatory framework. It’s a step toward flexibility, but not a full resolution of the complex interplay between crypto and government oversight.