HJRES-25-119
Became Public Law No: 119-5.
Sponsored by Mike Carey (R-OH)
What it does
This law nullifies an IRS rule issued on December 30, 2024, that would have required brokers facilitating decentralized finance (DeFi) digital asset transactions to report gross proceeds from those sales to the IRS. By canceling the rule through the Congressional Review Act, Congress also prevents the IRS from issuing a substantially similar rule in the future without new legislative authorization.
Who benefits
DeFi platform operators and developers who would have faced compliance obligations under the rule. Cryptocurrency traders and investors who use decentralized exchanges and would have had their transaction data reported to the IRS. Privacy-focused technology companies and open-source software developers who argued the rule would have imposed reporting burdens on non-custodial software. Cryptocurrency industry broadly, which gains regulatory relief. Venture capital firms and investors with significant DeFi holdings.
Who is hurt
The IRS and federal government, which loses a mechanism for collecting tax data on DeFi transactions and may face reduced tax compliance and revenue collection in this sector. Taxpayers broadly, who may bear indirect costs if unreported DeFi gains go untaxed and shift the overall tax burden. Traditional financial brokers already subject to equivalent reporting requirements, who now face an uneven regulatory playing field. Tax compliance software companies that had begun building tools to support the rule.
Supporters argue
Supporters argue that the IRS rule fundamentally misunderstood how decentralized protocols work — DeFi platforms are software, not brokers, and often have no central party capable of collecting or reporting user data. They contend that forcing compliance on entities that lack access to the required information would have effectively banned a class of financial technology, stifling innovation and driving development offshore, without meaningfully improving tax collection.
Opponents argue
Opponents argue that DeFi transactions represent a significant and growing source of taxable income that currently goes largely unreported, creating an unequal system where traditional investors face strict reporting requirements while crypto traders do not. They contend that eliminating the rule — and blocking any substantially similar future rule — removes a key enforcement tool and may cost the federal government billions in uncollected tax revenue, shifting the burden onto compliant taxpayers.
Constitutional context
The Taxing and Spending Clause (Art. I, §8, cl. 1) grants Congress broad authority to lay and collect taxes, which includes establishing reporting requirements that support tax enforcement. No direct constitutional challenge to the IRS rule itself was identified, though the broader question of taxing unrealized or hard-to-track digital asset gains touches the unresolved realization question left open in Moore v. United States (2024).
Checks and balances
Congress gains authority by nullifying an executive agency rule and blocking future substantially similar rules; the IRS (executive branch) loses rulemaking power in this specific area unless Congress passes new legislation explicitly authorizing it.
Historical precedent
Congress has used the Congressional Review Act to nullify agency rules before, most notably in 2017 when it repealed the FCC's broadband privacy rule, which similarly involved data reporting obligations on a technology sector.