Digital Chamber Sues to Block Illinois’ New Crypto Tax
The Digital Chamber (TDC), an industry advocacy group, has filed a lawsuit seeking to halt Illinois’ upcoming tax on digital assets, arguing that the measure unfairly targets blockchain transactions for discriminatory reasons.
Illinois’ Digital Asset Tax Act (DATA), slated to take effect on January 1, 2027, will impose a 0.02% levy on the full value of a digital asset each time it is transferred. The tax is applicable to cryptocurrency exchanges, wallet providers, and custodians operating within the state, as well as those generating over $100,000 in Illinois receipts from their services.
This law marks a first in the United States. Critics contend that it would result in multiple layers of taxation on a single transaction, thereby increasing costs and potentially stifling cryptocurrency activity in Illinois. Miles Jennings, a crypto executive at Andreessen Horowitz, has characterized the legislation as one of the most “anti-crypto laws” in the U.S.
The Digital Chamber is now petitioning the court to prevent the enforcement of the tax provision, asserting that individuals should not face differential treatment for engaging in digital asset transactions. The group also claims the clause was added to the legislation on the eve of its final vote, precluding any substantive public hearing.
“Today we filed a suit in Sangamon County, IL, to stop the Digital Asset Tax Act..it was slipped into the budget the night before the final vote,” the organization stated.
TDC members are also seeking a judicial ruling that the crypto tax violates both state and federal constitutions, and they are requesting reimbursement for the lobbying group’s legal expenses and court costs.
The lawsuit highlights that the legislation does not differentiate between profitable and loss-making transactions. Instead, it distinguishes between transactions based on the technology used to record ownership. This means that digital asset transactions recorded on a blockchain are treated differently from those utilizing traditional financial systems, which TDC argues constitutes unequal treatment. “No one should be taxed differently because of how ownership of digital assets is recorded or transferred,” the group stated.
Cody Carbone, CEO of TDC, emphasized that taxation policies require careful consideration to ensure fairness for all parties involved, adding that the lawsuit aims to protect consumers and the group’s members.
While Illinois adopts a more restrictive stance with its pioneering crypto tax, other states such as Texas and Florida are pursuing a more accommodating approach through crypto-friendly legislation. Texas, for instance, has enacted laws permitting Bitcoin to be held in state reserves, while Florida has banned the use of Central Bank Digital Currencies (CBDCs) and eased regulations for non-custodial crypto operators.
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