Staking Rewards: Is IRS Digging In Or Changing Its Mind?

Crypto industry groups had hoped to use the tax refund case of Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn.) as the vehicle to prove that staking rewards received by a crypto validator only trigger gain upon the ultimate disposition of the reward, rather than constituting taxable income upon receipt. However, as previously reported here, the IRS apparently decided it was not ready to fight that battle and sought to moot the taxpayer's suit by actually refunding (without explanation) the amount of tax the taxpayer claimed to have (over)paid on his staking rewards. The taxpayer, and a cryptocurrency policy group as amicus, asserted that the case should continue despite the refund since the IRS should not be able to avoid pending litigation by tendering a pre-emptory "settlement" and because the tax treatment of staking rewards was a recurring question for the Jarretts as well as a question of "public importance" that warranted an exception to the case's