Form 1099-DA and Digital Asset Broker Gross Proceeds Reporting: The 2026 Compliance Landscape

Two federal rules govern digital asset broker gross proceeds reporting, and the crypto industry has spent eighteen months confusing them. One — the custodial broker rule finalized as T.D. 10000 on July 9, 2024 — created Form 1099-DA and is fully operational today. The other — the DeFi broker rule finalized as T.D. 10021 on December 30, 2024 — was nullified by Congress in April 2025 and never applied to a single transaction.

The distinction is not academic. Practitioners still meet clients who believe the repeal eliminated crypto broker reporting generally, or that it made decentralized finance activity tax-free. Neither is remotely true. Reporting obligations on custodial intermediaries are broader in 2026 than at any prior point in US history, and the cost basis phase-in that began January 1, 2026 gives the IRS its first real ability to machine-match reported crypto gains against filed returns. This article separates what is in force from what was repealed, identifies where the reporting system still has holes, and sets out what brokers, DeFi participants, and tax preparers should be doing now.

Key Takeaways

• Custodial broker reporting is live and expanding. T.D. 10000 requires Form 1099-DA gross proceeds reporting for dispositions effected on or after January 1, 2025. The first payee statements reached taxpayers in early 2026.
• 2026 is the inflection year. Cost basis reporting phases in for covered digital assets acquired on or after January 1, 2026 — so the Form 1099-DA issued in early 2027 will carry a gain figure, not just a proceeds figure.
• The DeFi broker rule is void and was never operative. H.J. Res. 25, Pub. L. No. 119-5 (Apr. 10, 2025), disapproved T.D. 10021 under the Congressional Review Act. Its reporting obligations were not scheduled to begin until 2027, so no front end ever owed a return under it.
• Repeal changed reporting, not taxability. DeFi swaps, liquidity events, and staking rewards remain taxable under I.R.C. §§ 61 and 1001. Repeal means no third party files the paperwork — it does not mean no gain is realized.
• The reissuance bar runs to Congress, not Treasury. Under 5 U.S.C. § 801(b)(2), Treasury cannot issue a substantially similar non-custodial rule absent new statutory authorization.

What does the digital asset gross proceeds reporting rule require?

The statutory foundation is the Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, § 80603 (Nov. 15, 2021), which amended I.R.C. § 6045(c)(1)(D) to sweep into the definition of “broker” any person who, for consideration, is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person. That phrase — regularly providing any service effectuating — is the hinge on which the entire DeFi fight turned, and it is worth reading closely before advising any client on scope.

T.D. 10000 implemented that authority for custodial actors. Its operative requirements include:

• Gross proceeds reporting on Form 1099-DA for sales and exchanges of digital assets effected by a broker on or after January 1, 2025.
• Cost basis reporting for covered digital assets acquired on or after January 1, 2026 — the change that makes this tax year the real turning point.
• Wallet-by-wallet basis tracking. Basis must be determined on an account-by-account or wallet-by-wallet basis rather than universally across a taxpayer’s holdings. Rev. Proc. 2024-28 provided a one-time safe harbor for allocating unused basis across wallets as of January 1, 2025.
• Payment processor reporting for processors of digital asset payments, subject to defined thresholds.
• Real estate transactions. Real estate reporting persons must report the fair market value of digital assets paid as consideration in closings on or after January 1, 2026.
• Optional aggregate reporting for qualifying stablecoins and specified non-fungible tokens above de minimis thresholds.

Treasury paired the rule with substantial transition relief. Notice 2024-56 provided general penalty relief for brokers making good faith efforts to comply for 2025 transactions. Notice 2024-57 identified transaction categories — wrapping and unwrapping, liquidity provider transactions, staking, digital asset lending, short sales, and notional principal contracts — for which the IRS would not require reporting pending further guidance. Notice 2025-33 extended and modified backup withholding transition relief. Each of these was designed to expire in stages; confirm current status before relying on any of them.

Are you a broker for digital asset reporting purposes?

This is the first question most clients ask, and the answer after the repeal is more tractable than it was in early 2025. The practical dividing line is custody and control.

Generally within scope: centralized exchanges; custodial wallet providers; hosted trading platforms that take possession of customer assets; digital asset kiosk (ATM) operators; certain digital asset payment processors; and real estate reporting persons handling closings where digital assets change hands.

Generally outside scope following the repeal: non-custodial front-end interface providers; protocol developers who publish immutable smart contract code; validators and miners acting solely in that capacity; and self-custodied individual users.

Genuinely fact-dependent: hybrid platforms that route orders to on-chain liquidity while holding customer fiat or assets at any point; entities providing key-management or multi-party computation services; and non-US platforms serving US customers. On that last category, the analysis turns on whether the entity is a US payor or US middleman and where the transaction is effected — a fact-specific inquiry that should not be resolved from a blog post. Offshore status is not, by itself, an exemption.

The stakes for guessing wrong are structural rather than trivial. Penalties under I.R.C. § 6721 (failure to file correct information returns) and § 6722 (failure to furnish correct payee statements) apply per return and per statement, tiered by how promptly the failure is corrected and subject to annual caps — caps that fall away entirely for intentional disregard. For a platform with hundreds of thousands of reportable customers, per-item penalties compound into existential numbers.

What happened to the DeFi broker rule?

T.D. 10021 filled the space T.D. 10000 had expressly reserved. It expanded the “digital asset middleman” concept to reach front-end trading interface providers who have the ability to know the nature of a transaction and to amend or collect fees from it — even though such providers never hold customer keys or assets.

The industry objection was that compliance was not merely burdensome but impossible. A protocol front end typically cannot collect a Form W-9, cannot verify a taxpayer identification number, cannot perform backup withholding under I.R.C. § 3406 against a self-custodied wallet, and cannot know a user’s cost basis. A reporting mandate no covered person can physically satisfy operates as a prohibition on the underlying activity.

Litigation followed on Administrative Procedure Act and statutory-authority grounds, but Congress reached the question first. Critically, the rule’s reporting obligations were not scheduled to attach until sales effected on or after January 1, 2027. Repeal in April 2025 therefore arrived well before any return was due — which is why there is no residual exposure for front ends that declined to build reporting infrastructure during the rule’s brief formal existence.

How does a Congressional Review Act repeal work, and what does it foreclose?

The Congressional Review Act, 5 U.S.C. §§ 801–808, lets Congress nullify recently finalized agency rules by joint resolution, subject to presidential signature and immune from Senate filibuster under § 802. H.J. Res. 25 cleared both chambers with bipartisan support and was signed on April 10, 2025.

The rule is treated as never having taken effect. Under 5 U.S.C. § 801(b)(1), a disapproved rule “shall not take effect (or continue).” This is not a prospective sunset. The pre-existing regulatory text — the narrower custodial definition adopted in T.D. 10000 — snapped back into place as the operative law.

The reissuance bar is the durable win. Section 801(b)(2) provides that a disapproved rule may not be reissued in substantially the same form, and that no substantially similar new rule may issue, absent a law enacted after the disapproval specifically authorizing it. This is why the path to non-custodial reporting now runs through Congress rather than through Treasury rulemaking.

Two caveats belong in any client memorandum. First, “substantially the same form” is undefined, and no court has authoritatively construed it in this context — a future Treasury could plausibly test the boundary with a differently framed rule. Second, 5 U.S.C. § 805 provides that no determination, finding, action, or omission under the CRA is subject to judicial review. That provision is generally understood to insulate congressional CRA procedure; whether and how a regulated party could challenge a reissued rule as violating § 801(b)(2) — most likely through an ordinary Administrative Procedure Act challenge rather than under the CRA itself — is unsettled. Treat this as an open question, not a settled shield.

Does the repeal mean DeFi transactions are not taxable?

No. This is the most common and most dangerous client misconception following the repeal, and it should be corrected explicitly in writing.

Information reporting under § 6045 and substantive tax liability under §§ 61 and 1001 are independent regimes. The absence of a Form 1099-DA does not convert a taxable disposition into a non-event, any more than the absence of a Form 1099-NEC exempts freelance income from tax.

The governing substantive authorities are unchanged by the repeal. Notice 2014-21 establishes that convertible virtual currency is treated as property for federal tax purposes. Rev. Rul. 2019-24 addresses hard forks and airdrops. Rev. Rul. 2023-14 holds that staking rewards are includible in gross income when the taxpayer gains dominion and control. A token-for-token swap through a decentralized exchange is a realization event reportable on Form 8949 and Schedule D, and the taxpayer bears the burden of substantiating basis under I.R.C. § 6001.

The practical audit exposure has arguably increased. As custodial reporting matures, the IRS gains high-quality on-ramp and off-ramp data. Fiat entering a centralized exchange is visible; fiat leaving it is visible. What happens in between, if it happens on-chain, is not reported — which makes an unexplained delta between the two a natural selection criterion for examination.

Where does the reporting system still have gaps?

Even within the custodial regime, Form 1099-DA will frequently not tell the whole story. Four gaps recur:

• Transferred-in assets. I.R.C. § 6045A contemplates broker-to-broker basis transfer statements, but implementation for digital assets has lagged. An asset moved from a self-custodied wallet or a non-reporting platform into a covered exchange will generally arrive without basis information and be treated as noncovered — producing a 1099-DA showing proceeds with no basis.
• Pre-2025 and pre-2026 acquisitions. Assets acquired before the basis phase-in generate proceeds-only reporting indefinitely.
• Deferred-reporting categories. The Notice 2024-57 categories remain substantively taxable in uncertain ways even though reporting is deferred. Deferred reporting is not a substantive safe harbor, and clients routinely read it as one.
• Wallet-by-wallet allocation mismatch. A broker computes basis from what it can see in that account. If the taxpayer’s overall allocation was made under the Rev. Proc. 2024-28 safe harbor, the broker’s figure and the correct figure can legitimately diverge.

One state-level note: most states with an income tax compute liability starting from federal adjusted gross income or federal taxable income, so a federal gain generally flows through automatically without a separate state crypto information return. Whether Form 1099-DA data is shared with states through the Combined Federal/State Filing Program is a detail worth confirming for any multistate filer.

What remains unsettled?

• Legislative replacement. Proposals addressing digital asset taxation — de minimis exclusions for small personal transactions, mark-to-market elections for dealers and traders, staking and mining timing, and application of the wash sale rule under I.R.C. § 1091 — have circulated in Congress. Whether any has been enacted must be checked against current law.
• I.R.C. § 6050I. The IIJA extended the $10,000 cash-received reporting regime to digital assets. Announcement 2024-4 provided that persons need not treat digital assets as cash for § 6050I purposes until implementing regulations issue. Whether those regulations have been proposed is a verification item.
• Alternative routes to non-custodial visibility. The CRA bars a substantially similar rule; it does not bar every conceivable approach, including information-sharing arrangements or analytics-driven enforcement.

Practical Implications

For custodial exchanges and brokers: the obligation is unambiguous and now includes basis. As good-faith transition relief winds down, accuracy — not merely timely filing — becomes the standard against which §§ 6721 and 6722 penalties are measured. Backup withholding at 24% under § 3406 for missing or incorrect TINs is an operational and cash-management problem, not only a tax one.

For DeFi developers and front-end operators: the immediate reporting threat is gone and the CRA reissuance bar gives that outcome durability a litigation win might not have had. This is not a general exemption from financial regulation. Money transmission analysis under the Bank Secrecy Act, FinCEN registration, OFAC sanctions compliance, and state licensing are separate inquiries decided under separate authorities and unaffected by a tax reporting repeal.

For US taxpayers active in DeFi: the reporting gap shifts substantiation risk squarely onto you. Reconstructing years of on-chain activity under examination pressure is dramatically harder and more expensive than contemporaneous tracking.

For tax preparers: expect mismatches as the norm rather than the exception. Build the reconciliation workpaper contemporaneously, documenting each variance and its cause, so the response to an eventual CP2000 notice is a retrieval exercise rather than a reconstruction project.

What to Do Now

1. Confirm the current status of transition relief. Verify the operative posture of Notices 2024-56, 2024-57, and 2025-33 and any successor guidance before advising on penalty exposure.
2. Audit basis methodology against the 2026 phase-in. Confirm wallet-by-wallet allocation was properly implemented and that any Rev. Proc. 2024-28 safe harbor allocation is documented in contemporaneous records — that documentation is difficult to recreate later.
3. Reconcile every Form 1099-DA against client records before filing, with particular attention to transferred-in assets reported as noncovered.
4. Implement on-chain transaction tracking for DeFi-active clients now. The absence of third-party reporting increases, not decreases, the value of contemporaneous records.
5. Correct the “DeFi is untaxed” misconception in writing. Repeal of an information reporting rule is not repeal of a tax, and the distinction should appear in your engagement communications.
6. Monitor Congress rather than Treasury. Because of 5 U.S.C. § 801(b)(2), the next meaningful change to non-custodial reporting will most likely arrive as legislation.

Conclusion

The repeal of the DeFi broker rule was a genuine and durable victory for non-custodial crypto infrastructure — arguably more durable than a court win, because the Congressional Review Act constrains Treasury going forward in a way an adverse ruling might not have. But it was a narrow victory, and it has been widely oversold. Digital asset broker gross proceeds reporting is more demanding in 2026 than at any prior point, the basis phase-in now underway gives the IRS genuine matching capability for the first time, and every disposition outside a covered broker remains fully taxable with the documentation burden resting on the taxpayer. Reporting did not go away. It consolidated onto custodial intermediaries — and everything outside them is now the client’s problem to document.

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This article is for informational and educational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations in the cryptocurrency space change rapidly — consult a qualified attorney for advice specific to your situation and jurisdiction. Seth Goettelman is licensed to practice law in Wisconsin and Florida.