Illinois Crypto Tax Sparks Constitutional Challenge

Crypto advocacy groups are challenging Illinois' new digital asset tax in court. The Crypto Council for Innovation (CCI) and Blockchain Association (BA) filed a lawsuit against state officials, arguing that the 0.2% tax on cryptocurrency violates several constitutional laws.

The tax is set to be enforced starting January 2027, with crypto users taxed based on transaction volume rather than income. The CCI and BA argue that this approach is 'unconstitutionally vague,' placing a burden on residents and brokers to determine what and how digital assets are taxed under the threat of serious civil and criminal penalties.

The groups also claim that the tax discriminates against interstate commerce, creating the specter of duplicative taxation. Illinois Governor JB Pritzker signed the measure into law as a 'privilege tax' in June as part of the state's fiscal year 2027 budget.

'States have an important role to play in fostering innovation, but that authority has constitutional limits,' said Summer Mersinger, CEO of the Blockchain Association. 'Illinois cannot impose a novel tax regime that discriminates against digital commerce, creates uncertainty for consumers and businesses, and threatens to fragment a rapidly growing national market.'

This lawsuit follows a similar one filed by the Digital Chamber in July, which argued that the Illinois tax discriminates against people who transact in digital assets.