House Budget Chairman Jodey Arrington (R-TX) introduced legislation last year that would bring digital assets under the federal wash sale and constructive sale rules, a move that would sharply curtail the tax-loss harvesting strategies crypto investors have used to offset gains. The proposal, detailed in a June 17, 2025 press release, targets what Arrington described as a loophole that lets crypto traders claim losses on assets they quickly repurchase.
How the rules would work
Under current law, the wash sale rule prevents investors from deducting a loss on a security if they buy a substantially identical security within 30 days before or after the sale. The same rule applies to constructive sales — transactions that lock in gains or losses without an actual sale. Crypto has largely been exempt from these rules. That means an investor can sell a token at a loss, immediately buy it back, and still claim the deduction. Arrington's bill would close that gap by treating most digital assets like securities for wash sale purposes.
Limited exemptions
The proposal includes limited exemptions for certain categories of crypto activity. The press release didn't detail which categories, but the carve-outs are expected to cover stablecoins, some decentralized finance protocols, and mining rewards. The exemptions are narrow — they don't apply to the bulk of retail trading in volatile tokens.
A year later
The bill has been referred to the House Budget Committee, which Arrington chairs. No markup or vote has been scheduled since the June 2025 announcement. The proposal hasn't been enacted, and its path remains uncertain. But the idea has staying power — the IRS has been stepping up crypto tax enforcement, and similar bills have floated around both chambers. For now, investors can still harvest crypto losses. That window may not stay open forever.
