New Crypto Bill Suggests Unrealized Staking Gains Should Not Be Taxed

As US law currently stands, stakers and miners are required to pay taxes on rewards such as income, regardless of if the tokens were sold or traded

article-image

Blockworks exclusive art by BY AXEL RANGEL

share

key takeaways

  • Lummis/Gillibrand bill clarifies that unrealized staking and mining gains should not be taxed as income
  • The bill, if passed, would impact a tax law one Tennessee couple has been fighting for over a year

The long-awaited US digital asset bill introduced earlier this month provides clarity that could change the outcome of one legal battle currently underway. 

The Responsible Financial Innovation Act, co-sponsored by Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., states that miners and stakers would only have to pay income taxes on realized rewards — when the associated digital assets are sold. 

Income generated by digital asset mining and staking “shall not be included in the gross income of the taxpayer” until the taxpayer sells or trades the assets, the bill says.

The clause would change a tax law one Nashville couple has been fighting for over a year. 

In May 2021, Joshua and Jessica Jarrett requested a refund of $3,293 of income tax paid in 2019 for the receipt of 8,876 Tezos tokens, according to a legal complaint filed on May 26, 2021, with the US District Court for the Middle District of Tennessee. The couple also sought a $500 increase in tax credits for lost income. 

Tokens attained through proof-of-stake protocols are taxpayer-created property and should not be taxed until sold or exchanged, the Jarretts argued. The complaint claims that nothing under United States law, nor IRS code and regulations, allows taxpayer-created property to be taxed as income. 

The IRS offered the Jarretts a refund in December. The couple refused, choosing instead to continue to fight the matter in court. In March, the Department of Justice urged a judge to dismiss the case. A bench trial is currently set for March 2023.

As the law currently stands, stakers and miners are required to pay taxes on rewards as if they were income — the law does not consider if the tokens were sold or traded.

“This has been actually catastrophic for some clients that stake, for example, UST and via some of these very high-yield staking platforms,” Andrew Gordon, tax attorney and president of Gordon Law Group, said. “You are paying tax on those rewards at the fair market value as they’re coming in, not when you sell it, but as it comes in.” 

This bill, if passed, Gordon said, would create a strong incentive to bring miners and stakers to the US. 

The crypto bill now faces a lengthy vetting process, with it next moving into committee. Gillibrand serves on the agriculture committee, which has oversight of the Commodities Futures Trading Commission, and Lummis serves on the banking committee, which oversees the SEC.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates (19).png

Research

Suilend has grown into the top money market and liquid staking provider on Sui. STEAMM, Suilend’s Superfluid AMM, presents a compelling avenue for growing market share within Sui’s DEX landscape and revenue generation for the protocol. Suilend’s multi-product suite position it well for owning market share across key verticals. While current metrics across the Sui ecosystem are likely inflated due to Sui Foundation incentive programs, SEND trades at amongst the lowest multiples in the lend/borrow sector, suggesting that a bull case for continued growth in the ecosystem may be mispriced.

article-image

Strive board member Ben Werkman expects thousands of firms to hold BTC, if only “to protect themselves”

article-image

To date, 12.6 million humans have scanned at a World Orb

article-image

One small step for man, one giant leap for Bitcoin

article-image

Jay Woods, Chief Global Strategist at Freedom Capital Markets, said it would be “very rare” for an acquisition to happen since the IPO may occur as soon as next week

article-image

Sponsored

Money is one of the most consequential pieces of infrastructure, and M0 believes its architecture should serve builders, not extract from them

article-image

The financial backwaters they laughed at might be the only thing keeping the dollar afloat