The Blockchain Association, together with the Texas Blockchain Council and the DeFi Education Fund, have filed a lawsuit against the US Internal Revenue Service (IRS). The lawsuit targets recently announced regulations that plaintiffs say impose excessive restrictions on the decentralized finance (DeFi) sector. The association has criticized these measures, claiming they represent an overreach of the IRS’s authority.
Kristin Smith, CEO of the Blockchain Association, made the lawsuit public through a social media announcement. She called the IRS’s new brokerage regulations a violation of constitutional principles and procedural standards. Smith pointed out that the lawsuit specifically challenges the provisions of the Administrative Procedure Act.
New rules and industry concerns
The lawsuit comes hot on the heels of the IRS’s final report on digital asset regulation, which was released just two days earlier. These regulations, set to take effect in 2027, will require crypto brokers to report all user transactions conducted through their platforms. This mandate extends to decentralized exchanges (DEXs) and requires brokers to provide taxpayer information related to these transactions.
Under the new rules, the IRS has expanded the definition of brokers to include DeFi platforms that facilitate digital asset transactions via smart contracts. These platforms are now expected to adhere to the same reporting standards as traditional brokers, including adhering to Know Your Customer (KYC) requirements.
The Blockchain Association has strongly opposed this classification, citing the following:
