Sources: In Win for Crypto Stakers, IRS Says Untraded Tokens Are Tax-Free – Blockworks

  • In a win for cryptocurrency stakers and miners, the IRS will not tax unsold tokens
  • Tokens attained through proof-of-stake protocols are taxpayer-created property and should not be taxed until sold or exchanged, a Nashville couple argued in May

A decision to refund a Nashville couple taxes related to unsold Tezos tokens is set to clarify the tax treatment of staked cryptocurrency. 

In a win for cryptocurrency stakers and miners, the IRS has offered to refund the couple taxes paid on rewards gained — but not redeemed — from staking on the Tezos blockchain, according to people familiar with the matter. 

In May 2021, Joshua and Jessica Jerrett 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 Jerretts argued. The complaint claims that nothing under United States law or IRS code and regulations allows for taxpayer-created property to be taxed as income. 

The decision has potentially large implications for how proof-of-stake miners and stakers are taxed in the future. 

Official court filings are expected to be made public on Thursday. 

A representative from the IRS declined to comment.


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  • Blockworks

    Senior Reporter

    Casey Wagner is a New York-based business journalist covering regulation, legislation, digital asset investment firms, market structure, central banks and governments, and CBDCs. Prior to joining Blockworks, she reported on markets at Bloomberg News. She graduated from the University of Virginia with a degree in Media Studies.

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