Congressional lawmakers are pushing to close a tax loophole for cryptocurrency investors that has been estimated to cost the federal government billions of dollars annually. The effort represents a potentially rare area of bipartisan agreement on cryptocurrency taxation issues.
Under current tax law, crypto investors can claim tax deductions for investment losses while retaining their holdings in their portfolios. Traditional securities are subject to “wash sale” rules that prevent investors from claiming such losses if they repurchase the same or substantially similar security within 30 days before or after a sale. Cryptocurrency currently falls outside these protections because the federal government classifies digital assets as property rather than securities.
Rep. Jodey Arrington, a Texas Republican, introduced legislation in June called the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act, which would subject cryptocurrency transactions to wash sale rules. The Treasury Department estimated in 2024 that extending wash sale rules to digital assets would raise nearly $24 billion over a decade. The Biden administration and congressional Democrats previously attempted similar measures. Recent support from Republican lawmakers, including House Ways and Means Committee members, marks the first time the leadership of a tax-writing committee has proposed cryptocurrency reforms, according to tax experts.
The timing of the legislative push coincides with significant cryptocurrency price declines and resulting investor losses. Bitcoin has lost approximately half its value since October 2025, making the wash sale exemption more valuable to investors currently holding positions underwater. Experts noted that passage of the crypto tax package in coming months is unlikely as Congress approaches the midterm elections, though the proposals signal growing legislative interest in cryptocurrency taxation reform.
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