Crypto Trade Groups Sue Illinois Over New 0.2% Digital Asset Tax

Two major crypto industry groups have taken legal action against the state of Illinois, arguing that the newly enacted Digital Asset Tax Act imposes an unconstitutional and overly broad 0.2% tax on digital‑asset activities.

Who is suing and what relief is sought

The Blockchain Association and the Crypto Council for Innovation filed the complaint on Aug. 21 in Sangamon County Circuit Court. The suit names Illinois Department of Revenue Director David Harris, Attorney General Kwame Raoul and Sangamon County State’s Attorney John Milhiser as defendants. Plaintiffs request that the court declare the tax unlawful and issue both preliminary and permanent injunctions to stop enforcement before the Jan. 1, 2027 effective date.

How the tax differs from existing financial taxes

Unlike traditional taxes on stocks, cash transfers or gold storage, the Illinois law would levy 0.2% of a digital asset’s value whenever a transaction passes through a broker, even if no profit is realized. The complaint notes that activities such as swapping Bitcoin, moving assets between accounts, or paying for custody could trigger the tax.

Unclear taxable events and valuation

The statute does not clarify whether a single platform‑provided service that includes purchase, transfer and custody creates one, two, or three taxable events. It also fails to define when the asset’s “value” is measured—at order submission, execution, or settlement—potentially leading to vastly different tax liabilities.

Brokers face compliance uncertainty

Determining a customer’s Illinois residency for tax purposes may rely on mailing addresses, IP data and other records, placing the burden on brokers to prove a user is not a resident. Mistakes could expose platforms to civil and criminal penalties, prompting some firms to consider denying service to Illinois‑based users.

Legislative process challenges

The lawsuit also attacks the law’s passage, citing a rapid amendment process that expanded Senate Bill 3019 from a two‑page measure to a 1,624‑page package, with the Digital Asset Tax Act comprising fewer than 20 pages. Plaintiffs claim the expedited process violated Illinois constitutional requirements and that the tax conflicts with the federal Internet Tax Freedom Act, the dormant Commerce Clause, and due‑process protections.