Illinois Crypto Tax Fails First Hurdle as Industry Sues Over Compliance Costs

Illinois is set to impose a 0.2% tax on digital asset activity, including exchanges, transfers, and storage, as part of its Digital Asset Tax Act. The tax, which takes effect January 1, 2027, applies to covered exchanges and requires the charge to appear separately from the purchase price.

The Crypto Council for Innovation and Blockchain Association have filed a preliminary injunction motion to block the tax before it takes effect, arguing that companies face millions of dollars in compliance costs. According to an analysis by international law firm DLA Piper, brokers must register before conducting covered business, while certain recordkeeping, registration, and filing violations carry Class 3 felony penalties.

The associations argue that unclear rules could cause a single exchange or transfer to trigger the levy as many as three times, and that companies may lose customers before the court resolves the case. The state expects the tax to generate approximately $60 million annually, but critics say it unfairly singles out digital commerce and exposes companies to severe penalties.