Illinois Crypto Tax Challenged in Court by Trade Groups

Two industry groups – the Blockchain Association and the Crypto Council for Innovation – have sued three Illinois officials in Sangamon County Circuit Court to stop a 0.2% tax on digital assets from taking effect on Jan. 1, 2027.

Legal Claims

The 39‑page complaint alleges six violations, including breaches of the U.S. Constitution’s Commerce Clause and due‑process protections, the federal Internet Tax Freedom Act, and several provisions of the Illinois Constitution such as the Uniformity Clause and procedural reading requirements.

Scope of the Tax

Illinois would impose the levy on the full value of a customer’s digital assets whenever a covered broker exchanges, transfers, or stores them, even if the customer does not sell, transfer ownership, or realize a profit. Brokers meeting a $100,000 threshold from Illinois customers would be required to register, collect the tax as a separate charge, keep detailed records, and file monthly reports. Failure to collect could shift the liability to the customer, who would then owe the tax directly to the state.

Interstate Concerns

The plaintiffs argue the tax could result in double taxation of the same transaction if another state applies its own location test, because Illinois’ law allows officials to deem a transaction “Illinois‑based” based on address, account records, or IP address without providing a credit for taxes paid elsewhere.

Procedural Challenges

The complaint also contends that the legislation was rushed through the General Assembly, with the digital‑asset provisions added at the last minute to a bill that originally dealt with agricultural loans. The groups claim the bill received minimal public notice and was passed within 24 hours, violating Illinois’ rule that bills be read on three separate days.

Related Litigation

A separate lawsuit filed by the Digital Chamber in July challenges the same tax on similar constitutional grounds, arguing that the tax treats digital‑asset services differently from comparable transactions involving cash, stocks, bonds, or precious metals.

Potential Impact

If upheld, the tax could generate roughly $60 million annually for the state, according to budget estimates. However, the plaintiffs warn that the uncertainty and potential criminal penalties (including a Class 3 felony for non‑compliance) could force brokers to limit services to Illinois customers or face significant legal risk.