Solana Labs co-founder Toly highlights IRS tax changes over network tweaks

Anatoly “Toly” Yakovenko, co-founder of Solana Labs, made a pointed argument on September 7: changing how the IRS taxes block rewards would do more for Solana’s ecosystem than any tweak to the network’s burn mechanisms, transaction fees, or inflation schedule.

The tax problem nobody wants to do math on

The core issue traces back to IRS Revenue Ruling 2023-14, which treats staking rewards as ordinary income the moment a validator or delegator gains “dominion” over them. In practical terms, that means if you earn 100 SOL in staking rewards and SOL is trading at $150, you owe income tax on $15,000, even if you never sold a single token.

This creates what tax professionals call “phantom income.” You have a tax bill on gains you haven’t actually realized. If SOL’s price drops 40% before you sell, you still owe taxes based on the higher value at the time you received the rewards.

The burden falls hardest on smaller stakers who may not have the liquidity to cover tax obligations without selling their rewards. That selling pressure, ironically, can push prices down further, creating a cycle that discourages the very participation proof-of-stake networks depend on.

Legislative momentum, but no finish line

In December 2025, Representative Mike Carey and 18 of his congressional colleagues sent a letter to the IRS urging the agency to revise its guidance on staking and mining rewards before the 2026 tax year.

The core of the reform argument is that staking rewards should be treated as newly created property, not income. Under this framework, tokens earned through staking would only become taxable when they’re actually sold.

The Solana Policy Institute has been active on this front as well, filing legal briefs that advocate for realization-based taxation on newly minted tokens.

Despite the bipartisan interest, the IRS hasn’t budged from its 2023 position. Revenue Ruling 2023-14 remains in effect, and no formal rulemaking process has been announced to modify it.

Solana’s tokenomics debate takes a back seat

SGP-0002, a governance proposal that doubles Solana’s disinflation rate to 30%, was approved in late August 2026. The proposal accelerates the pace at which new SOL issuance decreases over time, making the token’s supply dynamics more deflationary.

Yakovenko’s framing suggests these efforts are secondary. His reasoning appears to be that enhancing network capacity and reducing latency, paired with favorable tax treatment, would have a compounding effect that dwarfs what protocol-level economic tweaks can achieve alone. He also indicated support for testing burn mechanisms specifically to benefit app developers, but positioned this as a complementary effort rather than the main event.

What’s actually at stake

The implications extend well beyond Solana. Every proof-of-stake network in the US ecosystem faces the same tax headwind. Ethereum stakers, Cosmos delegators, and participants across dozens of other networks all contend with the same Revenue Ruling 2023-14 framework.

The 2026 tax year is already underway, meaning any retroactive guidance change would need to come relatively soon to affect current filing obligations. For US stakers across every network, the clock is ticking on a problem that no governance proposal can solve.

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