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ConsenSys Backs Lawsuit Against IRS Over Taxing Staked Crypto

Crypto software giant ConsenSys will financially support an ongoing lawsuit challenging the IRS’ ability to tax staking rewards, the company announced Tuesday.

Mid-way through the lawsuit, the IRS offered to issue the Jarretts their requested refund, but the plaintiffs refused, eager to get assurances from a court that the issue wouldn’t arise in the future. No such assurances came to pass, however: a federal judge dismissed the case in October, deeming the Jarretts' grievances moot after a tax refund was issued.

Many had hoped the case would offer legal clarity to the millions of crypto users who generate cryptocurrency daily through proof-of-stake blockchains. Such networks—including, perhaps most notably, Ethereum—operate on a mechanism that encourages users to stake cryptocurrency with the network in order to validate on-chain transactions. In return for putting up those funds for extended periods of time, users accumulate newly generated cryptocurrency.

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