Three prominent blockchain advocacy organizations have filed a lawsuit challenging the Internal Revenue Service’s new reporting requirements.
The organizations argue that the rules could have serious consequences for the US digital asset industry, especially decentralized finance (DeFi).
The Blockchain Association, the DeFi Education Fund, and the Texas Blockchain Council jointly filed the legal challenge in the U.S. District Court for the Northern District of Texas.
They argued that the final regulations from the IRS and Treasury Department exceed their authority.
The lawsuit specifically addresses the expansion of the definition of “broker” to include providers of DeFi trading front-end services, despite the fact that these entities do not directly facilitate transactions.
Kristin Smith, CEO of the Blockchain Association, called the broker rule “unconstitutional” and claimed the IRS is violating the Administrative Procedure Act.
According to the Head of Legal Affairs of the Blockchain AssociationAccording to Marisa Coppel, this overshoot would “push this entire, rapidly growing technology abroad” while also infringing on the privacy rights of individuals using decentralized technology.
DeFi Education Fund CEO Miller Whitehouse-Levine expressed strong disappointment with the timing and scope of the regulations. Miller called it “midnight regulation” that threatens financial innovation.
The organization highlighted the potential of DeFi to make financial services more accessible, efficient and consumer-oriented.
Texas Blockchain Council Chairman Lee Bratcher emphasized the practical impossibility of compliance. He stated that many actors in the decentralized ecosystem simply do not have access to the information the IRS needs now.
“This regulatory overreach threatens to spur critical development abroad and threaten U.S. competitiveness in the digital economy,” Bratcher said.
The legal challenge comes after numerous stakeholders warned of the potential negative impact on the digital asset industry during the public comment period. Crypto.news had previously reported that DeFi proponents had promised aggressive action against the IRS policy.
