Illinois Crypto Trade Groups Ask Court to Halt New 0.2% Digital Asset Tax

Challenge targets scope of the Illinois tax

Illinois’ Digital Asset Tax Act applies a 0.2% levy to the value tied to covered digital asset activity received by an Illinois customer. The law covers separate instances of exchanging, transferring, or storing digital assets through a broker, and it requires the tax to be listed separately from the purchase price.

According to the challengers, that structure could allow a single sequence involving an exchange, a transfer, and storage to be taxed as many as three times. They argue this departs from more conventional tax treatment because it is based on the value of the underlying digital asset rather than on gains or income.

Industry groups say compliance burdens are already mounting

The Crypto Council for Innovation, which advocates for digital asset policy, and the Blockchain Association, which represents more than 100 industry companies, say the statute leaves key operational questions unanswered. Their motion argues that brokers still cannot clearly determine how often an exchange or ongoing storage arrangement becomes taxable, how to value assets for the tax, or how to resolve conflicting signs about whether a customer is located in Illinois.

The groups say that uncertainty is already forcing companies to spend heavily to prepare. In the court filing, they claim firms face compliance costs in the millions of dollars and could lose customers even before the broader case is decided. Crypto Council for Innovation CEO Ji Hun Kim said a decision that comes only after the tax takes effect would not reverse those harms.

Their filing also points to the mismatch between the tax and the service being provided. As an example, the motion says a broker handling $1 million in digital assets might charge only $1 to $10 for the service, while the Illinois tax could total $2,000.

Penalties and revenue projections add to dispute

Governor JB Pritzker signed the budget legislation containing the tax on June 16. The tax and related registration requirements are scheduled to become operative on Jan. 1, 2027, and Illinois expects the measure to raise about $60 million a year.

Out-of-state brokers generally fall into the collection system once they have at least $100,000 in gross receipts from Illinois digital asset activity over the prior 12 months. An analysis by DLA Piper said brokers must register before conducting covered business, and that some registration, recordkeeping, and filing violations can carry Class 3 felony penalties.

For an individual, an Illinois Class 3 felony generally carries a sentence of two to five years in prison, though probation or another authorized sentence may apply. The law’s criminal provisions include failing to register, filing a fraudulent return, failing to file a return, and failing to keep required records.

Broader legal fight is still moving forward

The Aug. 21 lawsuit alleges the tax discriminates against electronic commerce, burdens interstate transactions, denies due process, and violates Illinois constitutional rules on taxation and lawmaking. The new injunction request asks the court to pause enforcement while those claims are litigated.

This is also not the only legal challenge to the measure. The Digital Chamber filed a separate suit against Illinois on July 21, raising similar claims under the Commerce Clause, due process protections, the Illinois Constitution, and the federal Internet Tax Freedom Act.

The next confirmed step is the court’s decision on whether to block the tax before its scheduled start date. Until then, the core dispute remains whether Illinois can enforce a first-of-its-kind levy on crypto exchanges, transfers, and storage while the statute’s legality is still being tested.