Two cryptocurrency industry groups have filed a lawsuit against the state of Illinois seeking to block a new 0.2% tax on digital asset transactions before it takes effect in 2027.
The lawsuit challenges Illinois’ Digital Asset Tax Act, which was approved as part of the state’s fiscal 2027 budget. The tax is scheduled to take effect on January 1, 2027, and would apply to certain digital asset activities conducted by brokers, including exchanges, transfers, custody and wallet services.
The latest legal challenge comes as crypto industry groups continue to oppose the tax, arguing that Illinois is imposing a separate financial burden on digital asset activity that does not apply in the same way to traditional financial transactions.
Crypto groups challenge Illinois tax
The Digital Chamber and another industry group have moved to prevent the tax from being enforced. The organizations argue that the legislation violates several federal and state legal protections, including rules related to internet taxation and equal treatment.
The Digital Chamber previously filed a separate lawsuit against Illinois over the same legislation in July. In its complaint, the organization argued that the state had effectively singled out blockchain-based transactions because of the technology used to record and transfer digital assets.
The latest legal action adds to the growing opposition against the tax following its approval by Illinois lawmakers and subsequent signing into law by Governor JB Pritzker.
Under the legislation, digital asset brokers would be required to register with the state, collect the tax and submit monthly reports covering relevant transactions. The rules can also apply to certain companies located outside Illinois if they conduct qualifying business with customers in the state.
Tax expected to generate $60 million
Illinois budget documents estimate that the digital asset tax could generate approximately $60 million in annual revenue for the state.
Unlike traditional taxes that generally apply to investment gains or income, the Illinois measure is structured around covered digital asset activity. Industry representatives have argued that this could increase costs for crypto businesses and users, particularly because the tax can apply to transactions and services rather than only profits.
The Digital Chamber and Illinois Blockchain Association had previously urged lawmakers to remove the provision, arguing that the industry was not given sufficient notice before the measure was included in the state’s budget package.
Legal battle ahead of 2027 deadline
The lawsuit now places the Illinois digital asset tax before the courts months ahead of its scheduled implementation.
The plaintiffs are seeking preliminary and permanent injunctions that would prevent the state from enforcing the tax. However, no statewide court order blocking the legislation has been issued so far.
The legal dispute comes as cryptocurrency taxation remains a growing issue across the United States. Federal lawmakers are separately considering changes to crypto tax rules covering areas such as staking, mining, stablecoins and decentralized finance.
For Illinois, the outcome of the lawsuit could determine whether the state proceeds with one of the country’s most closely watched digital asset transaction tax measures or is forced to reconsider how cryptocurrency activity is taxed.
