The Senate rejected an amendment championed by the cryptocurrency industry that exempts non-custodial crypto actors from a crypto tax reporting requirement built into the $1 trillion infrastructure bill.

The amendment failed after Senator Richard Shelby attempted to tack on $50 billion in military infrastructure spending to it.

The original language of the bill changed tax reporting requirements to define certain actors involved in digital assets as "brokers" for tax purposes. This would require them to file 1099 tax forms with the IRS on behalf of customers, even if they did not have access to such information.

Cryptocurrency industry advocates had argued that the bill's language was too broad and would put a chill on innovation.

After putting forth rival amendments last week, the senators behind those amendments agreed on a compromise on Monday morning. The Toomey-Warner-Lummis-Sinema-Portman amendment made clear that non-custodial actors such as Bitcoin miners, validators on proof-of-stake networks, wallet providers, and protocol developers would not be included in the bill's reporting mandate.

However, as debate on the infrastructure bill had already closed on Sunday evening, the amendment could only be adopted into the bill by unanimous consent; a single "nay" vote would sink it and send the bill's original language forward for a vote tomorrow.

Senators Pat Toomey (R-PA), Cynthia Lummis (R-WY), and Rob Portman (R-OH) spoke in favor of the compromise amendment, as did Senator Ted Cruz—who predicted some would speak in opposition.

That didn't quite happen. Instead, Sen. Richard Shelby (R-AL) tried to piggyback consideration of his own amendment, which would have added $50 billion in military spending, to the crypto amendment. Sen. Toomey, who had risen to ask the room for unanimous consent, allowed it, but Sen. Bernie Sanders (I-VT) would not. Sen. Shelby then killed the cryptocurrency amendment.

Sen. Cruz then rose to offer his own amendment—which would strike the original cryptocurrency provision altogether—for unanimous consent. Sen. Shelby then asked for his amendment to be included in the Cruz amendment; Sen. Cruz said no, wanting a "clean vote." Shelby then objected to Cruz's amendment, ending all debate on the matter in the Senate for now.

The Senate is now scheduled to vote on the bill on Tuesday. If the bill is approved by the Senate, it will then go to the House of Representatives.

Editor's note: This story was updated after publication to provide additional details regarding the day's proceedings in the Senate.