Is Staking A Taxable Service?

On February 3, the Proof of Stake Alliance (“POSA”), a cryptocurrency industry association, issued a  press release regarding recent developments in a cryptocurrency tax case, in which the IRS approved the tax refund sought by the taxpayer, Mr. Jarrett. Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn.). The central issue in Jarrett  is the taxation of cryptocurrency Mr. Jarrett received as a reward for “staking” (Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn.)). Mr. Jarrett's attorneys have refused this refund because he intends to continue his pursuit of a court ruling on the taxation of staking rewards. ( See related court filings.)

The case arose after Mr. Jarrett filed an amended 2019 tax return seeking a refund of taxes he had paid on Tezos tokens he received as a reward for “staking” Tezos tokens. Tezos and other “proof of stake” cryptocurrencies, such as Ethereum, rely on owners of such cryptocurrency to validate transactions on the