A growing set of challengers is lining up against Illinois’ planned 0.2% tax on digital asset activity, with the US Department of Justice, major business associations and a coalition of crypto firms all filing in support of lawsuits seeking to block the measure.
The tax was enacted in June and applies to the value of digital assets that are exchanged, transferred or stored, whether or not a transaction produces a profit. Opponents argue that structure could create broad compliance burdens, reach firms outside Illinois and charge investors even when they lose money.
Multiple filings back the court challenge
According to a Thursday announcement from the Blockchain Association and the Crypto Council for Innovation, the Justice Department filed a statement of interest over the past week, while the US Chamber of Commerce and the Securities Industry and Financial Markets Association submitted an amicus brief. A separate filing came from a coalition that includes Andreessen Horowitz, Paradigm, Uniswap and Aave Labs.
The litigation began earlier this year. The Digital Chamber sued Illinois Attorney General Kwame Raoul and state revenue official David Harris in July. The Blockchain Association and Crypto Council for Innovation then brought a separate challenge in August.
How the Illinois tax is structured
Illinois’ law imposes a 0.2% tax based on the value of digital assets involved in an exchange, transfer or storage transaction. As described in the court fight, that means the levy is not tied to realized profit or gain.
Illinois had expected the tax to raise $60 million in fiscal year 2027, based on estimates from the governor’s budget office. The measure had originally been set to take effect on Jan. 1, 2027, but its start date was postponed to July 1, 2027, giving the legal challenges more time to proceed.
Business groups say the measure reaches too far
In a Nov. 6 filing, SIFMA and the US Chamber said the tax could affect banks, broker-dealers, custodians and asset managers nationwide. They warned that firms may face substantial compliance costs as well as added financial burdens for customers.
The groups said companies would need systems to identify which customers are in Illinois, assign values to digital assets and determine when transactions are taxable. They also argued that customers could owe the same tax regardless of whether they made money, and could be taxed when moving the same asset between accounts even if there was no sale, no gain and no change in beneficial ownership.
Their filing further contends that Illinois is singling out digital asset services because similar transactions involving traditional assets are not treated the same way. On that basis, they argued the measure may conflict with federal internet tax protections and constitutional rules governing interstate commerce and uniform taxation.
DOJ and DeFi coalition raise separate concerns
The Justice Department said on Nov. 6 that the Illinois tax cuts against federal efforts to support cryptocurrency innovation and maintain US leadership in the sector. Its filing pointed to the creation of a Strategic Bitcoin Reserve and to the GENIUS Act, which set federal rules for stablecoins, arguing that less favorable state tax treatment for digital assets could be inconsistent with those policies.
In a Nov. 11 filing, the DeFi coalition focused on who might be required to collect the tax under Illinois’ proposed rules. The group said those rules could place obligations on software developers and other blockchain participants that do not have customer information, do not control user funds and may lack any practical way to collect taxes.
What comes next
The tax is currently delayed until July 1, 2027, while the lawsuits move forward. For now, the next confirmed step is the continued court review of the challenges brought by the Digital Chamber, the Blockchain Association and the Crypto Council for Innovation, alongside the newly filed support briefs from the Justice Department, business groups and the crypto coalition.
Source: cointelegraph.com