Crypto holders have relied on a big tax loophole for a very long time. Now, they're at risk of losing it very soon.

The House could take up a bill shortly after the November midterms that would overhaul the tax framework for digital assets. Last month, the Ways and Means Committee advanced the measure, called the Digital Asset Tax Certainty Act, in a 38-5 bipartisan vote. And on Wednesday, Sen. Steve Daines, a Republican from Montana, introduced his plan to tax crypto.

The House bill includes sweeping tax changes that would affect crypto transfers, mining, and staking. One is the elimination of a loophole for so-called wash sales that crypto owners have used for a long time.

Right now, investors generally can't claim a loss on a stock or security if they buy a substantially identical asset within 30 days before or after selling it. The rule is designed to keep investors from selling an asset simply to take a tax loss while keeping essentially it.

But the wash-sale rule doesn't apply to direct cryptocurrency holdings, which aren't treated the same as stocks or securities for tax purposes. That means a crypto investor can, for example, sell Bitcoin at a loss and then buy it back a short time later and still claim the original loss.

The new tax bill would change that, but there isn't much time left in the year to act. The House returns from recess on Nov. 9, and could take a vote in the lame-duck session.

Another key piece of crypto legislation, the Clarity Act, failed to pass the Senate in September-largely along party lines. The crypto tax bill, however, could still gain traction as part of a broader funding package.

"Historically, such much-pass, year-end vehicles can create hitchhiking opportunities for unrelated bipartisan provisions that would have difficulty securing stand-alone floor time during a compressed legislative calendar," Jessica Jeane, director of Baker Tilly's national tax practice, wrote in a note.

Unless the bill passes, investors can reap major tax savings from buying and selling the same Bitcoin or Ethereum.

Consider an investor who bought Bitcoin when it was worth $100,000 but is now holding it at a lower price, producing an unrealized loss of $5,000. With the current loophole, the investor can sell-and immediately buy back-the Bitcoin to realize that loss, offsetting $5,000 in capital gains elsewhere. For an investor with $20,000 in realized long-term capital gains taxed at 15%, that would reduce their tax bill by hundreds of dollars.

The measure could make tax-loss harvesting-selling investments that have fallen in value to offset taxable gains elsewhere-far less flexible for crypto investors.

Still, experts play down the impact that closing the wash-sale loophole would have on investors.

Jirayr Kembikian, co-founder and managing director of Citrine Capital, said the bill's passage wouldn't be a significant hit for his clients.

"A few of our spot Bitcoin holders have taken advantage of this unique wash sale rule," Kembikian says. "However, most of the spot Bitcoin holders generally haven't purchased significant amounts recently, so the benefit is limited."

Cryptocurrency remains a relatively niche investment, according to Motley Fool Money's 2026 Cryptocurrency Investor Trends Survey.

If the wash-sale loophole is eliminated, the government would rake in an estimated $1.7 billion in tax revenue over 10 years, according to the Joint Committee on Taxation, a nonpartisan panel that serves both the House and Senate.

The bill also introduces an optional "mark-to-market" tax system for professional crypto traders and dealers. Those who opt in must treat all unsold digital assets as if they were sold at market value on the last business day of the year.

While taxing unrealized gains seems like a drawback, the system allows active traders to bypass strict limits on loss deductions.

Under standard tax rules, taxpayers generally can deduct $3,000 in net capital losses against ordinary income each year. The mark-to-market election eliminates that cap, allowing professionals to deduct their full trading losses immediately as ordinary losses.

In exchange, the government collects taxes on unrealized gains each year rather than waiting until traders sell their assets, generating an estimated $2.3 billion in additional tax revenue over 10 years.

That revenue would be largely offset by other provisions, including a tax exemption for crypto transactions with fees of $10 or less and a tax change sought by gamblers.

The gambling provision would reverse a change made under the One Big Beautiful Bill Act, which limited deductions for gambling losses to 90% of the amount wagered, even when those losses exceeded winnings. Lawmakers have introduced several bills to restore the full deduction, arguing that the current rules unfairly tax gambling income that doesn't exist.

Overall, the bill is projected to generate $500 million in additional tax revenue over 10 years. While its impact on federal revenue would be modest, the legislation would mark a significant step toward aligning the tax treatment of cryptocurrency with that of traditional securities.