Crypto lobby sues Illinois to block 0.2% digital asset tax
A major crypto trade group is seeking to strike down Illinois' transaction levy, in a case that could shape how states tax digital asset markets.
The Digital Chamber filed a lawsuit on Tuesday to block Illinois from enforcing its new Digital Asset Tax Act. The legal challenge targets a 0.2% levy on crypto transactions that state lawmakers inserted into the budget last month just before adjourning for the year. The tax is scheduled to take effect in January.
The legislation applies to any company based in Illinois or providing digital asset services in the state with gross receipts exceeding $100,000. By targeting blockchain infrastructure rather than traditional financial mechanics, the lobby group argues the law creates an uneven playing field for the industry.
"The Act does not distinguish between gains and losses, between profitable and unprofitable transactions, between realized and unrealized appreciation, or between transfers that change ownership and transfers that do not," the lawsuit states. "It distinguishes only between traditional financial infrastructure and blockchain infrastructure."
The Digital Chamber asserts the tax violates the Illinois constitution’s uniformity and due process clauses, as well as the U.S. Constitution’s Commerce Clause. Furthermore, the group claims the state law is preempted by the Internet Tax Freedom Act, which the suit notes established a rule that "electronic commerce would not be subjected to discriminatory state and local taxation."
Federal law draws a clear boundary between what an asset represents "from the infrastructure used to record them," according to the filing. The plaintiffs contend that "no other body of law makes a distinction tied to what technology records ownership."
For crypto firms and investors, the outcome of this case carries significant regulatory weight. If Illinois successfully implements this levy, other states may pursue similar transaction-based taxes, potentially driving up operational costs for exchanges and wallet providers. A ruling in favor of the Digital Chamber would reinforce federal preemption and protect the industry from a fragmented patchwork of state-level taxes on digital infrastructure.
The trade group is asking the court to declare the tax unconstitutional and permanently block its enforcement. The filing also requests that Illinois cover the legal fees and costs incurred by the organization's members.
