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The Digital Chamber has sued Illinois to stop a new 0.2% tax on digital asset transactions before it takes effect in January 2027. The crypto industry group filed the complaint in Sangamon County on July 21. It argues that the law treats digital asset activity differently from comparable financial transactions and creates new compliance costs for companies serving Illinois customers.
Digital Chamber Seeks to Block the Tax Before It Takes Effect in January
The lawsuit asks the court to block enforcement of the Digital Asset Tax Act. The Digital Chamber said its members are already incurring compliance costs ahead of the effective date on January 1, 2027.
The group argues that the measure discriminates against digital asset users because it applies based on how ownership is recorded or transferred. The Digital Chamber’s filing states that the tax applies regardless of whether an investor realizes a gain or whether ownership is transferred.
New Tax Covers Crypto Trading, Transfers and Digital Asset Custody
The law charges a 0.2% tax on Illinois-based digital asset business activity. Among covered services are digital asset exchange, transportation, and storage.
Digital asset brokers must collect the tax and send it to the Illinois Department of Revenue. An out-of-state broker must begin collecting it after reaching at least $100,000 in Illinois gross receipts over a 12-month period.
The tax is calculated based on the digital asset’s value rather than the broker’s service fee or the customer’s profit. The law specifically includes storage as a taxable digital asset business activity, whereas its broker definition includes businesses that handle customer transfers on a regular basis. Centralized exchanges, digital asset platforms, and other transaction intermediaries are covered by those definitions.
Industry Groups Say the Tax Could Push Brokers Out of Illinois
Crypto groups opposed the measure before Governor J.B. Pritzker signed it as part of a greater revenue bill. They argued that the tax could increase compliance costs and discourage companies from serving Illinois customers.
The tax law uses a different definition of digital asset business activity from Illinois’ separate Digital Assets and Consumer Protection Act. The law firm Croke Fairchild notes that the tax law omits several exclusions found in the consumer protection law, including exclusions for some peer-to-peer activity, software development, and decentralized services.
The Tax Takes Effect in January, but Key Regulations Are Not Written Yet
The Illinois Department of Revenue has not yet released the regulations needed to explain valuation, record keeping and transaction sourcing. The law authorizes the department to issue rules and forms before the effective date on January 1, 2027.
The law uses a rebuttable presumption based on a customer’s IP address or billing address to determine whether the customer is in Illinois. The broker carries the burden of proving that a transaction should be sourced outside the state.
Brokers must also register before conducting covered business with Illinois customers, even before they reach the $100,000 collection threshold. The law counts the receipts as Illinois transactions unless the broker proves they came from another state.
