The Crypto Council for Innovation and Blockchain Association filed a motion on Sept. 8 seeking a preliminary injunction from Sangamon County Circuit Court to block Illinois's Digital Asset Tax Act before it takes effect on Jan. 1, 2027.
The 0.2% tax applies to digital asset exchanges, transfers, and storage conducted by Illinois customers through brokers. Unlike traditional capital gains taxes, the levy targets the value of the underlying digital asset rather than profits or income. The state projects the tax will generate approximately $60 million annually.
Illinois Governor JB Pritzker signed the legislation in June as part of the state budget. Brokers with at least $100,000 in gross receipts from Illinois digital asset activity must register before conducting covered business.
Compliance Concerns and Penalties
The trade groups argue that the statute creates ambiguities leaving companies unable to determine taxability thresholds. They highlight questions about how brokers should establish asset values, determine customer location, and identify when a single transaction triggers multiple tax applications.
The organizations claim companies already face millions of dollars in compliance costs and risk customer losses before the court resolves the broader constitutional challenge. They note that certain recordkeeping, registration, and filing violations carry Class 3 felony penalties, which in Illinois generally carry two to five years in prison.
A filing illustrates the potential disparity between tax and service fees, noting that Illinois would collect $2,000 on a $1 million asset transfer while a broker might charge between $1 and $10 for the service.
Constitutional Claims
The Crypto Council for Innovation and Blockchain Association alleged in an August 21 lawsuit that the tax discriminates against electronic commerce, burdens interstate transactions, denies due process, and violates Illinois constitutional requirements governing taxation and lawmaking.
The Digital Chamber filed a separate lawsuit on July 21 raising similar claims under the Commerce Clause, due process protections, the Illinois Constitution, and the federal Internet Tax Freedom Act.
The court must determine whether to block enforcement while the broader constitutional challenges proceed.
