Illinois recently approved a 0.2% tax on cryptocurrency transactions, with the new rule expected to take effect next year.
A leading crypto industry advocacy group has filed a lawsuit against Illinois over the tax measure, which was added to the state’s budget package shortly before the legislative session concluded.
The Digital Chamber alleges that the Digital Asset Tax Act is unconstitutional under both state and federal law and conflicts with federal tax policy. The organization’s lawsuit, filed Tuesday, asks a federal court to prevent Illinois from enforcing the new tax.
The complaint argues that the measure violates Illinois’ constitutional protections requiring uniform taxation and due process. It also claims the law conflicts with the U.S. Constitution’s Commerce Clause and the Internet Tax Freedom Act by placing unique tax requirements on digital asset activity.
The Digital Asset Tax Act was passed with limited notice during the final days of Illinois’ legislative session. The 0.2% tax applies to businesses located in Illinois or companies providing digital asset services that generate more than $100,000 in gross receipts. The rule is scheduled to begin in January.
According to The Digital Chamber, the Internet Tax Freedom Act established that online commerce should not be subjected to discriminatory state or local taxes, which the group argues makes Illinois’ approach unlawful.
The lawsuit claims the legislation does not differentiate between transactions that generate profits and losses, realized versus unrealized gains, or transfers that alter ownership compared with those that do not. Instead, the group argues that the law primarily separates blockchain-based transactions from traditional financial infrastructure.
The filing also states that federal law distinguishes between an asset and the technology used to record ownership of that asset. The group argues that no other area of law creates a tax distinction based solely on the system used for ownership tracking.
Filed on behalf of Digital Chamber members, the lawsuit requests that the court invalidate the tax under state and federal constitutional standards, prevent Illinois from applying the law, and award legal fees and related costs to the organization.
