President Trump Formally Voids the IRS’s "DeFi Broker" Rule and Signs The United States' First Crypto Legislation

Today, President Trump signed into law House Joint Resolution 25, legislation to disapprove of the decentralized finance-focused portion of the Treasury Department’s Internal Revenue Service’s (IRS) Broker Rule “‘Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales,” which would have had devastating effects on DeFi technology in the United States. With President Trump’s signature, the rule is officially disapproved and voided, and the United States has passed its first ever crypto legislation—a watershed moment for DeFi. 

By signing the legislation into law, the Administration recognizes the intent of Congress to formally disapprove of the flawed rule and to protect Americans’ right to transact through decentralized software protocols and maintain self-custody of their digital assets. 

DEF welcomes the growing bipartisan coalition of policymakers who have acted to protect DeFi’s promising future in the United States. We are deeply appreciative of Representative Mike Carey and Senator Ted Cruz’s leadership in sponsoring the legislation, and we look forward to continuing to work with policymakers from both sides of the aisle. 

For a comprehensive history and a summary of what we can learn moving forward to 1) prevent burdensome and unreasonable requirements on DeFi front-ends; and 2) ensure we are not violating the privacy of DeFi users—please see below. 

Background on the DeFi-Killing “Broker” Rule

In December 2024, the IRS finalized the DeFi “broker” rulemaking that required DeFi market participants—who according to the IRS, facilitate digital asset sales via front-ends on DeFi protocols—to report gross proceeds and provide payee statements for user transactions. 

The rule mandated the insertion of intermediaries where they do not exist and the collection of sensitive information on customers and their transactions in a noncustodial setting. Prior to this, Treasury finalized the “broker” rule for custodial market participants in June, leaving DeFi out of the rule and stating they would revisit at the end of the year.

Put simply, the DeFi broker rule attempted to achieve tax-reporting in DeFi by forcing website developers or anyone “assisting customers in initiating” a transaction to be treated as a “broker,” undermining the disintermediated nature of the technology. Specifically, Treasury purported to redefine the statutory term “broker”—which Congress defined to reach only those who, “for consideration . . . effectuat[es] transfers of digital assets on behalf of another person,” to reach anyone who provides a “trading front-end service” or “other effectuating services,” even if they do so for free and even if the service does not itself effectuate transfers.

In other words, the finalized rule was so broad as to capture any service that is supposedly “assisting customers in initiating” a transaction as a “broker,” including front-ends and even web browsers, and internet-service-providers (ISPs). The rule fundamentally exceeded the Treasury’s statutory authority, disregarded the technological realities of DeFi, and would have violated the privacy of millions of DeFi users.

The final IRS regulations pertaining to DeFi were supposed to implement amendments to Section 6045 of the Internal Revenue Code made by the Infrastructure Investment and Jobs Act and were aimed to clarify the definition of a “broker” to encompass activities in the digital asset ecosystem. Congress considered including noncustodial participants in the legislation but ultimately decided not to do so because of the crucial differences between noncustodial software providers and traditional financial intermediaries. 

DeFi Education Fund’s Lawsuit 

Due to the imminent threat the rule presented for the DeFi industry, DEF, Blockchain Association (BA), and Texas Blockchain Council (TBC) filed a lawsuit against the Treasury for violations of the Administrative Procedure Act (APA) and the U.S. Constitution.

In our lawsuit, we make several important arguments: 

1. We argue that the Treasury Department acted “in excess of [its] statutory jurisdiction, authority, or limitations” given to it by Congress by fundamentally redefining the term “broker” beyond the statutory text. The statute defines a broker as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person,” which clearly does not include front-ends or DeFi protocols.

2. We argue that the rulemaking is arbitrary and capricious because it failed to “articulate a satisfactory explanation for [its] actions” or establish a “rational connection between the facts found and the choice made.” Additionally, the Treasury did not address significant points raised in public comments, thereby violating the APA.

3. We argue that the rule is invalid under the APA because it violates the 4th Amendment’s protection against unreasonable search and seizure without probable cause and violates the 5th Amendment’s Due Process Clause, which requires fair notice and standards to prevent discriminatory enforcement.

Background: DeFi CRA Resolution

Upon the commencement of the 119th Congress, legislation was swiftly proposed in both the House and Senate aiming to leverage the Congression Review Act (CRA) to formally disapprove of the DeFi portion of the rule. The CRA is a law that allows Congress to review and overturn new federal agency rules and regulations. If both the House and Senate approve a resolution under the CRA to challenge a rule and the President signs it, the challenged rule is invalidated and cannot be reissued in substantially the same form.

On March 4, 2025, the Senate voted on Senate Joint Resolution 3 (S.J. Res. 3), Senator Ted Cruz’s (R-TX) CRA resolution. In a heavily bipartisan 70-27 vote, the resolution passed.

Ahead of the Senate floor vote, the White House’s Crypto and AI Czar, David Sacks, released a Statement of Administration Policy (SAP) on the proposed legislation. The Administration announced strong support for the disapproval resolution, noting that the broker rule inappropriately requires certain DeFi participants to report sensitive taxpayer data in relation to gross proceeds from crypto transactions. The SAP also noted that if S.J. Res. 3 were presented to the President, “his senior advisors would recommend that he sign into law.”

In the House, H.J. Res. 25, Representative Mike Carey’s (R-OH) companion resolution, subsequently passed the 292-132, with 76 Democrats voting for the legislation.

As all revenue bills must originate in the House, Representative Carey’s resolution was sent back to the Senate for a final vote. On March 26th, the Senate voted once again to formally pass the so-called “DeFi Broker” CRA, H.J. Res. 25 – with another bipartisan supermajority of 70 Senators supporting DeFi by voting yes on the resolution. 

The votes in both chambers of Congress underscored the overwhelming bipartisan support for DeFi and strong disapproval of the harmful overstep from the Biden Administration’s Treasury Department.

Today, President Trump signed the bill into law, marking the first-ever crypto legislation to be signed into law in the United States. 

Implications: What does this mean for DeFi?

The Administration signing the bill into law is a massive win for the DeFi industry. The IRS’ midnight rulemaking provided an overly broad redefinition of “broker” that was designed to create brokers where there weren’t any. In doing so, developers of DeFi front-ends would have been required to collect unreasonable amounts of sensitive user information solely because the IRS perceived them to facilitate digital asset sales like a broker. In reality, developing and maintaining front-end websites for decentralized software protocols constitutes a completely different act—that is, providing access tools for users to conduct their own financial transactions. 

To be clear, the DeFi “Broker” rule wasn’t flawed because it sought to create tax compliance in DeFi, it was flawed because it misclassified certain participants as brokers who are clearly not brokers, ignored statutory law, violated user privacy, and disregarded congressional intent. Most importantly, the rule ignored the realities of self-custodial and DeFi technology. 

Repealing the rule isn’t about avoiding tax compliance or evading the law. It’s about upholding the rule of law, respecting the clear intent of Congress, and protecting the right of users to  transact without intermediaries and retain self-custody of their assets. Tax compliance for individuals who use DeFi is already achievable. Any new obligations must be done in a way that respects the technology and self-custody, and does not violate user privacy. 

As conversations on tax compliance in decentralized, noncustodial financial systems continue, we encourage policymakers to pay mind to the technological and practical realities of DeFi. The task at hand is to continue recognizing how DeFi technology is distinct from previous financial systems, and commit to legislation that is able to distinguish software tools from true financial intermediaries.

The DeFi Education Fund is deeply thankful for the tireless efforts of Congress and the Administration to protect DeFi and self-custody as a regulatory framework for digital assets is developed.