The Blockchain Association and the Crypto Council for Innovation (CCI) have legally challenged Illinois’s new Digital Asset Tax Act. The lawsuit asks the court to declare the legislation unlawful and to issue preliminary and permanent injunctive relief to prevent the state from enforcing it.
Constitutional and Federal Law Allegations
The lawsuit claims that the Digital Asset Tax Act exceeds Illinois's constitutional authority by specifically targeting digital-asset activity. According to the challenge, the law violates the Dormant Commerce Clause by unfairly discriminating against or placing excessive burdens on interstate commerce. Ji Hun Kim, CEO of the Crypto Council for Innovation, stated that taxing digital asset activity without an equivalent tax for traditional assets unlawfully favors certain assets over others.
Additionally, the lawsuit alleges that the legislation violates the federal Internet Tax Freedom Act (ITFA), which generally restricts discriminatory taxes on internet access and certain forms of electronic commerce. The crypto community has expressed concern that if Illinois is permitted to enforce the special tax, other states might follow, resulting in a fragmented system where companies must navigate a different tax structure in every state.
Procedural Concerns and Legislative Process
Beyond the tax itself, the legal challenge targets the legislative process. The groups argue that the Digital Asset Tax Act moved through the Illinois legislature within hours, allowing insufficient time for debate, public notice, or input from affected businesses and residents.
The lawsuit also raises due process concerns regarding the clarity of the law's requirements. Because businesses and users need to understand when the tax applies and how much they owe, the groups claim that vague rules violate constitutional protections.
