Digital Chamber sues Illinois over planned 0.2% tax on digital asset transactions

Tax challenged in federal court

The lawsuit was filed Tuesday and asks a federal judge to block Illinois from implementing the Digital Asset Tax Act. According to the complaint, the law imposes a 0.2% tax on certain crypto-related transactions and is scheduled to take effect in January.

The measure applies to entities based in Illinois or those providing services in the state if they have more than $100,000 in gross receipts. The provision was inserted into the state budget on short notice shortly before lawmakers concluded their work for the year.

Claims under state and federal law

The Digital Chamber, referred to in the suit as TDC, alleges that the tax breaks the Illinois Constitution’s uniformity and due process clauses. It also argues the law violates the Commerce Clause of the U.S. Constitution.

In addition, the group says the measure is preempted by the federal Internet Tax Freedom Act. Its argument is that the Illinois law singles out digital asset transactions in a way that amounts to discriminatory taxation of electronic commerce.

How the lobbying group frames the tax

In the complaint, TDC contends the federal law bars state and local taxes that discriminate against electronic commerce. The organization argues that Illinois’ tax is aimed specifically at blockchain-based activity rather than comparable activity conducted through traditional financial systems.

The lawsuit further says the tax does not distinguish between gains and losses, profitable and unprofitable transactions, realized and unrealized appreciation, or transfers that change ownership and those that do not. Instead, it argues, the law draws a line between traditional financial infrastructure and blockchain infrastructure.

Timing and next steps

The case comes after Illinois approved the Digital Asset Tax Act during a rushed end-of-session period last month. With the tax not due to take effect until January, the lawsuit appears aimed at stopping enforcement before the measure is implemented.

A federal judge will now be asked to decide whether the challenge can move forward and whether Illinois should be prevented from enforcing the tax while the case is litigated. The filing reflects a broader legal dispute over whether states can create tax rules that treat digital asset activity differently from other forms of commerce.

The case does not resolve the legality of the tax on its own, but it puts Illinois’ new digital asset levy under immediate judicial review and raises questions about how far states can go in designing crypto-specific tax measures.