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A bipartisan digital-asset tax bill advancing in Congress could significantly change the federal tax treatment of cryptocurrency traders—and reverse the new 90% limitation on wagering-loss deductions.
On September 16, 2026, the House Ways and Means Committee voted 38–5 to advance an amended version of the Digital Asset Tax Certainty Act, H.R. 10357, for consideration by the full House. The committee approved Chairman Jason Smith’s substitute amendment before the final vote.
The bill is not yet law. The House and Senate must pass identical legislation, and the president must sign it. Nevertheless, several provisions could directly affect my recent articles on wash sales, §475 mark-to-market accounting, and prediction markets.
Crypto Could Become Subject to the Wash-Sale Rules
Direct cryptocurrency, such as Bitcoin, is generally treated as property for federal income tax purposes and is generally not considered stock or securities for purposes of the §1091 wash-sale rules. Crypto-related funds, securities, options, and derivatives may be subject to different rules.
The committee-approved bill would extend §1091 to traded digital assets, generally excluding assets specifically defined as qualified U.S. dollar stablecoins. If a taxpayer sold a covered digital asset at a loss and acquired substantially identical property within 30 days before or after the sale, the loss generally would be deferred and added to the replacement position’s tax basis.
The proposal also includes anti-avoidance provisions that apply to certain contracts, options, tokenized assets, and wrapped assets. These provisions are intended to prevent taxpayers from avoiding the wash-sale rules by switching temporarily into an economically equivalent digital asset or financial instrument.
Certain acquisitions would not trigger wash-sale treatment, including assets received in connection with transaction validation or supporting activities and certain regular or periodic acquisitions included in ordinary income.
If enacted, these changes could make tax accounting considerably more difficult for traders who use multiple exchanges, wallets, and accounts. Traders could be responsible for identifying replacement purchases even when the loss sale and subsequent purchase occur on different platforms.
For affected digital-asset dispositions before January 1, 2028, the bill would allow brokers to determine customer basis for reporting purposes without applying the new wash-sale rules. That broker-reporting relief would not eliminate the taxpayer’s obligation to apply the rules.
Traders could therefore need specialized accounting software to calculate wash-sale adjustments that do not appear on broker reports. Even after the transition period, broker reporting might not identify every taxpayer-level wash sale because broker rules generally focus on identical assets acquired in the same account, whereas the taxpayer rules can apply more broadly across accounts and platforms.
The committee substitute would apply the new wash-sale provisions to dispositions after September 14, 2026. That potentially retroactive effective date deserves close attention as the legislation moves through Congress.
The Joint Committee on Taxation estimates that extending the wash-sale rules to digital assets would increase federal revenues by approximately $1.7 billion over fiscal years 2027–2036.
See my recent article, Wash-Sale Losses for Traders: How to Avoid Phantom Income and Costly Tax Traps.
Section 475 MTM Could Become Available to Digital-Asset Traders
The bill would permit qualifying dealers and traders in covered digital assets to elect §475 mark-to-market accounting.
Under current law, §475 expressly addresses securities and commodities but does not explicitly address digital assets. Whether particular digital assets qualify under the existing definitions remains uncertain. We have taken a conservative position and have not treated §475 as available for direct cryptocurrency trading.
The proposal would create a clearer election framework for qualifying dealers and traders in covered digital assets.
Mark-to-market accounting generally treats covered open positions as though they were sold at fair market value on the last business day of the tax year. If enacted, qualifying crypto traders could mark eligible positions to market at year-end and generally report the resulting gains and losses as ordinary items.
Potential benefits could include:
- Ordinary gain-or-loss treatment on covered business positions
- Exemption from wash-sale loss adjustments on those positions
- Relief from the $3,000 annual capital-loss limitation
- Potential qualification of net §475 ordinary income for the 20% qualified business income deduction, subject to the specified service trade or business limitations
These benefits would not apply automatically to every active crypto trader. The taxpayer would still need to qualify for trader tax status, make the §475 election correctly, identify any excluded investment positions, and comply with the final transition procedures.
The bill’s definition of covered positions would include eligible digital assets and certain related digital-asset positions and hedges.
Special Transition Rules Could Affect 2026 and 2027
The new digital-asset §475 provisions would apply to taxable years beginning after enactment.
For taxpayers making the new election for the first eligible year beginning after enactment and before January 1, 2028, special transition rules would address preexisting positions, the initial mark-to-market adjustment, and certain prior-year wash sales.
The proposal would spread the initial net §481 accounting adjustment over four years and provide a special 30-day identification period for covered positions held at the beginning of the first election year. Pre-election built-in gains and losses would not automatically become ordinary; their prior character generally would be preserved in the transition adjustment.
The 30-day period concerns identifying positions, not the deadline for making the §475 election.
The bill also provides conditional relief for certain preceding-year digital-asset wash sales involving transactions made in the ordinary course of the taxpayer’s dealer or trader activity.
If the bill is enacted in 2026, a qualifying calendar-year taxpayer’s §475 election for 2027 could therefore affect the treatment of some 2026 digital-asset wash sales. This is conditional relief with specific requirements, not a blanket exemption for 2026 cryptocurrency losses.
JCT estimates that the dealer-and-trader mark-to-market provisions would increase federal revenues by approximately $2.3 billion over fiscal years 2027–2036. That is a ten-year federal budget estimate, not a prediction of the tax result for an individual trader.
Full Wagering-Loss Deductions Could Return
H.R. 10357 also incorporates the FULL HOUSE Act, which would repeal the One Big Beautiful Bill Act’s new 10% haircut on wagering-loss deductions.
If enacted as written, the bill would restore the prior rule allowing wagering losses and related expenses to offset wagering winnings without the 10% haircut. Losses still could not exceed wagering gains.
The provision would apply to taxable years beginning after December 31, 2025, making the change effective for 2026.
This could affect prediction-market participants if their contracts are ultimately classified as wagering transactions. However, the bill does not establish a blanket tax classification for prediction-market contracts. It does not resolve whether particular contracts should be treated as capital transactions, wagers, swaps, §1256 contracts, or another type of property.
See my analysis, How Are Prediction-Market Trades Taxed—Capital Gains, Gambling, or Something Else?
What Happens Next?
The 38–5 vote demonstrates bipartisan support in the committee, but committee approval is only one step in the legislative process.
Digital-asset traders should continue to apply current law and should not treat the proposed wash-sale expansion or the new digital-asset §475 election framework as enacted law. Nevertheless, traders should maintain detailed transaction records and monitor legislation, as the proposed effective dates could affect transactions occurring before enactment.
Sources: committee-approved substitute to H.R. 10357, House Ways and Means Committee markup record, and Joint Committee on Taxation revenue estimate.
Research and drafting assisted by AI tools, used under my direction; I verified all citations and am responsible for the analysis and conclusions.
