Organizations including the Blockchain Association, Texas Blockchain Council, and DeFi Education Fund have filed a lawsuit asking the court to prohibit the U.S. Internal Revenue Service (IRS) from enforcing new rules requiring DeFi companies to provide user and transaction data.

1/ Yesterday, @blockchainassn @fund_defi @texasblockchain_ filed a lawsuit against the IRS challenging yesterday's finalization of the broker rule. The rule violates the Administrative Procedure Act and is unconstitutional.https://t.co/ikeKxUtpdd
— Marisa Tashman Coppel (@MTCoppel) December 28, 2024

The IRS had proposed regulations mandating brokers in decentralized finance to disclose client and transaction information, with the rules set to take effect on January 1, 2027. This initiative sparked criticism within the community.

The plaintiffs argue that the rules mistakenly classify interface providers, software developers, and wallet services as brokers, despite these entities not conducting transactions or serving as traditional intermediaries. They emphasize that such services have no “clients” in the conventional sense.

Additionally, the lawsuit claims that the data collection infringes on DeFi users’ privacy and exceeds the IRS’s authority. The plaintiffs allege that the proposed rules violate the U.S. Constitution and the Infrastructure Investment and Jobs Act.

“DeFi enables users to participate in a fairer financial system. But now, the government is imposing intermediaries where there are none, increasing risks and creating more opportunities for inequality. We need to protect DeFi technology, not destroy it,” said Marisa Coppel, Head of Legal at the Blockchain Association.

In related news, a couple of Tezos validators is pursuing a court case to force the IRS to revise taxation rules for staking income.