Repeal of the DeFi rule for brokers becomes law

On April 10, 2025, Donald Trump signed H.J.Res.25 and completed the cancellation of the DeFi rule for brokers approved by Treasury and the Internal Revenue Service (IRS) in December 2024. The ruling became Public Law 119-5 and rendered the rule of no force or effect before its main reporting obligations began.

The measure used the Congressional Review Act (CRA), a mechanism that allows Congress to disapprove recent rules through a joint resolution signed by the president. It was the first law of the new administration aimed specifically at crypto assets. Its scope, however, was narrower than a general repeal of digital taxation.

What did the cancellation of the DeFi rule for brokers achieve?

The overturned rule was titled “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.” Certain interface or front-end providers capable of regularly facilitating sales of digital assets, even if they did not directly custody the funds, would have been considered reporting brokers.

Those providers would have to identify users and report gross receipts using Form 1099-DA for future operations. Tesoro argued that certain interfaces exercised sufficient control over access and execution to fit the legal concept of a broker. The DeFi sector responded that many developers did not know the counterparties nor could they gather the data required by autonomous protocols.

The law did not modify the tax definition of income, gain or loss on a transaction-by-transaction basis. A user was still required to report sales, exchanges, and other taxable dispositions even if he or she did not receive a form. The absence of information from an intermediary does not make the transaction exempt.

The special effect of the Congressional Review Act

The CRA requires that a disapproved rule be treated as if it had never gone into effect and limits the ability to publish a “substantially the same” rule in the future without subsequent legal authorization. This expression is not defined in detail and its application can generate debate, but it increases the legal cost of reconstructing the same administrative regime.

The resolution did not eliminate Congress’s power to pass new reporting rules or prevent the IRS from applying different rules within its authority. Nor did it resolve what degree of control converts a technology provider into an intermediary for other purposes, such as sanctions, money transmission or prevention of money laundering.

For developers, the difference between front-end and protocol was still relevant. An interface can select tokens, charge fees, route orders, or control updates even if the underlying contract is immutable. The tax annulment avoided a specific obligation, it did not declare any application that uses smart contracts legally decentralized.

Why it was relevant for DeFi

Compliance with Form 1099-DA could require the introduction of identification and data retention in interfaces designed without customer accounts. Its withdrawal reduced the risk that US providers would shut down, geoblock users, or transform their architecture solely to report gross revenue.

It also showed that the definition of a digital intermediary was being decided in several ways. Congress could limit a Treasury rule, while agencies and courts continued to examine brokerage under other laws. For one project, winning the tax argument did not automatically resolve the others.

Outlook from 2026

The rules for custodian brokers remained in force. The IRS applied gross receipts reporting to certain transactions made since January 1, 2025 and added baseline information for certain assets since 2026. Form 1099-DA instructions continued to be developed for custodian exchanges, hosted wallets, kiosks, and some processors.

As of August 2026, the DeFi front-ends covered by the December 2024 rule were no longer subject to that extension. The practical distinction remained: the law eliminated a third-party duty, but taxpayers retained their obligations to calculate, document, and declare results.