Two U.S. crypto trade groups have sued three Illinois officials to stop a 0.2% digital asset tax from taking effect on Jan. 1, 2027.
Summary
- The Blockchain Association and Crypto Council for Innovation want the court to block the tax before its 2027 start.
- The complaint alleges violations of the U.S. Constitution, the Illinois Constitution, and the federal Internet Tax Freedom Act.
- Brokers could face registration, collection, reporting, and recordkeeping duties backed by civil and criminal penalties.
- The Digital Chamber filed a separate lawsuit against the same tax in July.
Illinois crypto tax faces six legal claims
The 39-page complaint, filed by the Blockchain Association and Crypto Council for Innovation in Sangamon County Circuit Court, seeks declaratory and injunctive relief against the Digital Asset Tax Act.
Filed against Illinois Department of Revenue Director David Harris, Attorney General Kwame Raoul, and Sangamon County State’s Attorney John Milhiser, the case challenges the officials responsible for implementing, collecting, and enforcing the tax.
According to the filing, Illinois would impose the levy on the full value of a customer’s digital assets whenever a covered broker exchanges, transfers, or stores them. The groups said a customer could owe the tax even without selling an asset, transferring ownership, or earning a profit.
The complaint sets out six counts under federal and state law. CCI and the Blockchain Association allege that the measure violates the federal Internet Tax Freedom Act, the Commerce Clause, and due process protections under the U.S. Constitution.
At the state level, the groups claim the tax violates Illinois’ Uniformity Clause, unlawfully delegates tax policy to an administrative agency, and fails to meet a state constitutional rule requiring bills to be read by title on three separate days in each legislative chamber.
Calling the measure “unconstitutionally vague,” the plaintiffs said brokers and Illinois customers cannot determine with enough certainty which activities fall under the law or who must collect and remit the tax. The groups argued that the uncertainty carries serious consequences because statutory violations could expose a broker to a Class 3 felony.
The filing also claims that some association members are already spending money on outside legal and tax advice and changing their systems to calculate, collect, and record the levy. According to the plaintiffs, withholding court review would leave affected firms with a choice between limiting service to Illinois customers and risking criminal liability.
Groups say interstate transactions could be taxed twice
Under its Commerce Clause claim, the complaint argues that Illinois has not fairly limited the tax to economic activity within the state. The law allows officials to treat a transaction as occurring in Illinois by relying on details such as a customer’s address, account records, or IP address.
The groups said another state could use its own location test for the same transaction, raising the possibility that two jurisdictions would tax one transfer. A customer with an Illinois address who completes an online transaction while visiting another state could therefore create competing tax claims if both states adopted similar rules, according to the filing.
Illinois also lacks a credit for comparable tax paid to another state, the complaint said. On that basis, the plaintiffs allege that the measure could place interstate digital asset activity at a disadvantage compared with transactions conducted entirely within one state.
Summer Mersinger, CEO of the Blockchain Association and a former Commodity Futures Trading Commission member, said states can support new industries but must remain within constitutional limits.
“Illinois cannot impose a novel tax regime that discriminates against digital commerce, creates uncertainty for consumers and businesses, and threatens to fragment a rapidly growing national market.”
The Internet Tax Freedom Act claim focuses on the tax treatment of online commerce. According to the complaint, the federal law prevents states from imposing discriminatory taxes on electronic transactions when equivalent offline activity receives more favorable treatment.
Illinois does not impose the same levy on the exchange, transfer, or storage of cash, stocks, bonds, or precious metals, the plaintiffs said. The filing gives the example of an Illinois resident who can store gold in a safe deposit box without paying the new tax but would face the 0.2% charge when using a service to hold Bitcoin.
Brokers and Illinois customers could both owe duties
As crypto.news reported in June, Governor JB Pritzker signed the tax into law as part of Illinois’ $55.9 billion fiscal 2027 budget. State budget documents estimated that the levy could generate about $60 million annually.
The law places a 0.2% “privilege tax” on the value of digital assets tied to covered business activity received by an Illinois customer. Covered services include exchanging, transferring, and storing digital assets through a broker.
According to tax advisory firm BDO USA, certain out-of-state brokers can fall under the law when they receive at least $100,000 from Illinois customers during a 12-month period. Location tests can draw on billing details, customer records, mailing addresses, and IP information.
Covered brokers must register with the Illinois Department of Revenue, collect the tax from customers as a separate charge, keep transaction records, and submit monthly filings. When a broker does not collect the levy, the statute directs the customer to assess the amount and pay the department by the 20th day of the following month.
The latest complaint says different sections of the law create uncertainty over which firms must follow each requirement. While one part places collection duties on brokers with an Illinois place of business, another appears to require the broker completing a sale to collect the levy without applying the same revenue threshold, according to the plaintiffs.
CCI and the Blockchain Association also challenged how lawmakers passed the measure. Their filing said Senate Bill 3019 began in January as a two-page proposal concerning loans for agricultural property before lawmakers replaced its contents on the final day of the legislative session.
Two amendments expanded the legislation into a 1,624-page package covering subjects ranging from vehicle weight rules to sports wagering. The complaint said the digital asset provisions took up fewer than 20 pages and contained no legislative findings explaining the tax.
According to the groups, House and Senate committees gave the public about an hour or less of notice before hearings, while both chambers passed the rewritten bill within 24 hours. Pritzker signed it on June 16 as Public Act 104-468.
A second lawsuit targets the same 0.2% levy
The case is the second industry challenge filed against the Illinois tax. In July, the Digital Chamber filed its own lawsuit in the same state court, arguing that Illinois had taxed digital asset services differently from economically similar transactions involving traditional assets.
The Digital Chamber asked the court to declare the law void and unenforceable. Its complaint also alleged violations of federal and state constitutional protections and challenged the state’s decision to base tax treatment on the technology used to record or move an asset.
Public objections began before the budget became law. The Crypto Council for Innovation asked Pritzker to remove the digital asset provisions through a line-item veto, while the Digital Chamber and Illinois Blockchain Association said lawmakers gave affected businesses no meaningful notice.
Strategy co-founder Michael Saylor later called the law a “Big Mistake.” Miles Jennings, general counsel and head of policy at a16z Crypto, said in June that no comparable state financial transaction tax applied to stocks, bonds, or derivatives.
Illinois has also faced a separate court fight over prediction markets. Kalshi challenged a state law that treats sports event contracts as wagers and requires operators to obtain state licenses.
In its federal complaint, Kalshi argued that the Commodity Exchange Act gives the CFTC exclusive authority over contracts listed by federally regulated markets. The company said complying with the Illinois licensing system would create additional expenses, while blocking state residents could require new geofencing systems.
Pritzker had earlier signed Executive Order 2026-04 restricting state employee trading on prediction platforms when nonpublic information obtained through official duties could be used to make a profit or avoid a loss.
