Uniswap Labs, Andreessen Horowitz, and DeFi Education Fund Urge Illinois Regulators to Exempt Decentralized Exchanges from Broker Definition in New Digital Asset Tax Rules

Uniswap Labs, Andreessen Horowitz, and DeFi Education Fund Challenge Illinois Digital Asset Tax Regulations

Illinois, USA – October 30, 2026

In a bold move to protect the burgeoning decentralized finance (DeFi) sector, Uniswap Labs, venture capital firm Andreessen Horowitz, and the DeFi Education Fund have united to urge Illinois regulators to exempt decentralized exchanges and their associated web applications from the state’s proposed digital asset tax. Their concerns were articulated in a comment letter submitted to the Illinois Department of Revenue, responding to draft regulations released on September 28.

The proposed Illinois Digital Asset Tax Act imposes a 0.2% levy on digital asset transactions and outlines who qualifies as a broker responsible for collecting this tax. However, the three organizations argue that software protocols and self-custody wallets should not be classified in the same category as traditional intermediaries that manage customer funds.

Miles Jennings, policy lead and general counsel at a16z’s crypto division, criticized the draft regulations on social media, labeling them as “among the most anti-innovation laws in the country.” He emphasized that autonomous software cannot function as a tax collector, highlighting the challenges of classifying decentralized exchanges as brokers.

A significant point of contention in the proposed rules is a requirement for brokers to record and retain customers’ private keys. The organizations contend that this provision poses a severe risk, as leaked private keys could lead to asset theft. Jennings likened taxing withdrawals from centralized exchanges to personal wallets to imposing fees on transfers between one’s own bank accounts.

The letter argues that decentralized exchanges operate as autonomous software without any intermediary controlling customer assets or executing trades. Unlike centralized platforms, these systems lack the ability to verify customer identities, determine locations, or report individual transactions, making compliance with the proposed regulations virtually impossible. The groups warn that enforcing such duties could effectively shut down DeFi services in Illinois.

The DeFi Education Fund, a nonprofit advocating for the rights of users and builders in the sector, joined forces with Uniswap Labs and Andreessen Horowitz to assert that open-source software tools should be regulated differently from firms that handle customer funds.

The implications of this regulatory battle extend far beyond Illinois. If the broker classification remains in the final rules, other states considering similar tax measures may adopt the same framework, imposing compliance burdens on DeFi developers that the technology was never designed to handle. Conversely, a carve-out for decentralized exchanges could set a precedent, allowing developers to argue that code without custody does not constitute a financial intermediary.

As the Illinois Department of Revenue prepares to review the comments before finalizing the regulations, the industry is closely watching for key outcomes, including the treatment of the broker definition, the effective date of the tax, and the fate of the private-key recordkeeping requirement. Until the rules are finalized, the application of this tax to decentralized finance tools remains uncertain.

With the start date for the tax reportedly pushed back to July 2027, the ongoing dialogue between regulators and industry stakeholders will be crucial in shaping the future of digital asset taxation in Illinois and potentially across the nation.