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ARTICLE · 07 JANUARY 2025

IRS Broker Rule For Digital Assets Faces Constitutional Challenge From Industry Leaders

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Three digital asset organizations have jointly filed a lawsuit challenging the Internal Revenue Service's (IRS) new digital asset broker reporting rule.

United StatesTechnology
Daniel J. Davis
Daniel J. Davis
Alexander C. Kim
Alexander C. Kim
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Three digital asset organizations have jointly filed a lawsuit challenging the Internal Revenue Service's (IRS) new digital asset broker reporting rule.1 The complaint, filed in the Northern District of Texas on December 27, the same day the IRS issued the final rule, alleges that the rule not only exceeds the IRS's statutory authority but also violates the Fourth and Fifth Amendments of the Constitution.2

The new IRS rule requires "digital asset middlemen" to collect and report detailed transaction information to the IRS. The plaintiffs argue that this requirement fundamentally misunderstands the decentralized nature of decentralized finance (DeFi) technology and would effectively force the creation of intermediaries where none currently exist — a move that could devastate the US DeFi industry.

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