Key Vote Alert – Senate – “YES” on S.J. Res 3 – A Joint Resolution Providing for Congressional Disapproval of the Rule Submitted by the Internal Revenue Service Relating to “Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales”

The Club for Growth urges all Senators to vote YES on S.J.Res.3 – A joint resolution providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Internal Revenue Service relating to “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.” The results of this vote will be included in the Club for Growth Foundation’s 2025 congressional scorecard.

One of the key innovations of blockchain technology is the facilitation of peer-to-peer transactions without the need for intermediaries. This is an economic game-changer that will fuel productivity, innovation, and financial accessibility with nearly limitless applications. This technology also provides added protection for individuals faced with debanking efforts, politically motivated government snooping, and other invasions of privacy.

As with any innovation that makes the lives of the American people better, the federal government is eager to seize what it views as its rightful share. Accordingly, the Infrastructure Investment and Jobs Act (IIJA) included an extraneous revenue-raising provision to crack down on alleged “tax evasion” from digital asset exchanges, expanding the definition of broker under the Internal Revenue Code to include “…any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”

Regardless of the underlying justification, rulemaking from the IRS in June 2024 limited this provision to centralized digital asset intermediaries with the capability of collecting this information. Not content with this, the IRS expanded this rule to include decentralized finance (DeFi) in rulemaking published at the end of last year. The addition of DeFi protocols betrays a fundamental misunderstanding of decentralized platforms, which by their very nature are unable to provide the information required by the IRS. The additional compliance burdens on these platforms will inhibit innovation and economic growth while driving investment overseas. Additionally, the rule compromises the personal financial information of DeFi platform users and would subject them to unnecessary and constitutionally dubious government surveillance. The Club for Growth urges all lawmakers to support S.J. Res. 3, which would rescind the IRS rulemaking and ensure that DeFi protocols are not subject to its requirements.