Illinois Crypto Tax Faces Constitutional Challenge from Industry Groups

Illinois's new digital asset tax law is facing another challenge from industry groups as it prepares to go into effect on January 1, 2027. The Blockchain Association and the Crypto Council for Innovation have filed a complaint in Sangamon County Circuit Court, alleging that the Digital Asset Tax Act is invalid due to preemption under the federal Internet Tax Freedom Act, violations of the Commerce Clause, and breaches of Illinois constitutional rules.

The complaint argues that the tax, which will be 0.2% of the value of customer assets, is unfairly burdensome on everyday crypto users and does not apply equally across all assets, as stocks do not face a similar levy. The plaintiffs are seeking a declaration that the Digital Asset Tax Act is invalid, as well as preliminary and permanent injunctions blocking implementation and enforcement.

This is not the first challenge to the new tax law, with another group, The Digital Chamber, having filed a separate complaint in August. However, this latest challenge comes from different industry groups and raises concerns about the constitutionality of the tax.