House Republicans Urge IRS to Reconsider Crypto Staking Tax Rules

Staking is a process used by many modern blockchain networks to secure transactions and maintain operations. Instead of mining, participants lock up tokens and, in return, receive newly issued assets as rewards. Under current IRS guidance, those rewards are taxed based on their market value when the taxpayer gains control of them, even if the tokens are not sold or converted into cash.

In a letter sent to Acting IRS Commissioner Scott Bessent, the lawmakers, led by Representative Mike Carey, raised concerns about existing guidance that treats staking rewards as taxable income the moment they are received. They urged the agency to reconsider this position before the start of the 2026 tax year, arguing that the rules do not fully reflect how staking actually works in practice.

The lawmakers argue that this creates a disconnect between tax obligations and real-world outcomes. In their view, staking rewards resemble newly created property rather than income paid by an employer or third party. As a result, they believe taxes should be applied when the asset is sold or otherwise disposed of, rather than at the moment it comes into existence.

They also highlighted the practical challenges facing taxpayers who stake digital assets. Rewards can be issued frequently and in small amounts, making it difficult to track values accurately. In some cases, individuals may owe taxes on assets they are still holding, forcing them to find other sources of cash to meet their tax obligations. According to the lawmakers, this complexity risks pushing participants away from staking altogether.

The letter places the issue within a broader policy conversation about how U.S. tax rules apply to rapidly evolving digital technologies. Proof-of-stake systems have become a central part of the crypto ecosystem, and the lawmakers suggest that tax guidance developed without fully accounting for these systems may now be outdated.

Beyond policy concerns, the lawmakers also pressed the IRS for greater clarity around how the current guidance was developed. They asked whether alternative approaches were considered and whether there are administrative obstacles preventing the agency from updating its position before the next tax year begins.

Timing is a key factor. Any changes made before the end of 2025 would affect how staking rewards are treated in the 2026 tax year. Without updated guidance, the existing rules are likely to remain in place, continuing to shape how taxpayers report staking activity.

While the letter does not change tax law on its own, it adds to growing congressional scrutiny of how digital assets are regulated through agency guidance rather than legislation. Lawmakers across multiple policy areas have increasingly questioned whether regulatory interpretations are keeping pace with innovation.

The outcome of this request could be significant. A revised approach could simplify compliance and reduce friction for participants, while maintaining the current framework would preserve a system that many see as difficult to navigate.

The debate over staking taxation highlights a wider challenge for regulators: applying long-standing tax principles to new technologies in a way that is fair, practical, and aligned with how these systems actually function.