Crypto groups sue Illinois over 0.2% digital-asset tax

Two trade groups, the Blockchain Association and the Crypto Council for Innovation, filed suit on Aug. 21 in Sangamon County Circuit Court to block Illinois’ 0.2% digital-asset tax. They asked the court for preliminary and permanent injunctions to stop enforcement before the levy would take effect on Jan. 1, 2027.

The complaint names Illinois Department of Revenue Director David Harris, Attorney General Kwame Raoul and Sangamon County State’s Attorney John Milhiser as defendants and asks the court to declare the Digital Asset Tax Act invalid.

The filing describes the tax as a 0.2% levy on the value of a digital asset when certain activity flows through a digital-asset broker, rather than a tax on gains or income. It contends the statute could reach trades, swaps, internal transfers and custody services, and quotes the law as potentially applying when a customer ‘buys nothing, sells nothing, gains nothing, and transfers no ownership.’

The complaint raises questions about how many taxable events occur when a single customer interaction involves multiple services. A crypto transaction can include an exchange execution, a transfer into a user account and ongoing custody. The filing argues the statute does not specify whether that sequence creates one taxable event or several. It also notes custody is continuous and asks whether a year of storage counts as one tax occurrence, whether each billing period is taxable, or whether changes in an account balance trigger new taxable events.

The plaintiffs say the statute does not define when an asset’s taxable value should be measured — whether at the time a broker receives an instruction, when the trade is executed or when settlement happens. The complaint highlights location rules that can create a presumption a customer is in Illinois based on account records, mailing addresses, IP addresses and other data, shifting the burden to brokers to prove otherwise.

The filing warns that conflicting location signals could expose platforms to civil and criminal penalties. It says companies are already spending on legal advice and system changes to prepare for the Jan. 1 start date and that some firms may restrict or block customers who might be in Illinois to avoid potential felony liability. The lawsuit follows a separate challenge filed in July by the Digital Chamber.

The complaint also challenges the legislative process that produced the tax. It traces the Digital Asset Tax Act to amendments to Senate Bill 3019, which began as a two-page agricultural finance measure and was expanded into a 1,624-page package. The filing says the digital-asset tax covers fewer than 20 pages of the final bill, that the public received roughly an hour’s notice for committee hearings, and that the bill cleared both chambers within 24 hours.

On legal grounds, the suit alleges the tax discriminates against electronic commerce in violation of the Internet Tax Freedom Act, infringes the dormant Commerce Clause, and violates state and federal due-process protections as well as the Illinois Uniformity Clause and legislative-process rules. The plaintiffs asked the court to bar registration and collection efforts and to prevent enforcement while the legal challenges proceed.