Two major crypto advocacy groups have sued Illinois officials, aiming to stop a new digital asset tax from taking effect, arguing it unfairly targets crypto transactions and could leave brokers and customers facing significant tax bills.
The Blockchain Association and Crypto Council for Innovation launched the legal action in Sangamon County Circuit Court, seeking declaratory and injunctive relief against Illinois’ Digital Asset Tax Act.
The lawsuit names Illinois Department of Revenue Director David Harris, Attorney General Kwame Raoul and Sangamon County State’s Attorney John Milhiser as defendants.
The law is scheduled to take effect on Jan. 1, 2027, and imposes a 0.2% tax on the value of digital assets involved in certain exchanges, transfers or storage activities conducted through digital asset brokers, while also requiring covered brokers to register, collect and remit the tax.
Crypto groups attack tax as discriminatory
The plaintiffs argue Illinois is treating digital assets differently from comparable financial assets, noting that transactions involving money, stocks, bonds or precious metals are not taxed in the same way.
Their complaint says the law violates the federal Internet Tax Freedom Act by imposing what they describe as a discriminatory tax on electronic commerce. They also allege violations of the U.S. Constitution’s Commerce Clause and due process protections, along with several provisions of the Illinois Constitution.
The groups argue the tax could apply even when a customer realizes no gain or changes no ownership, including transfers between a person’s own wallets or accounts.
They also challenge how the tax is calculated, arguing that basing it on the full value of the digital asset rather than the broker’s fee could produce charges disproportionate to the underlying service.
Groups seek to block enforcement
The lawsuit also targets what the plaintiffs describe as ambiguity around which transactions are taxable, how digital assets should be valued and how frequently ongoing custody or storage could trigger the levy.
The advocacy groups are asking the court to declare the Digital Asset Tax Act unlawful and prevent Illinois officials from enforcing it, setting up a legal fight over one of the most aggressive state-level crypto tax measures in the United States.
