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The Blockchain Association and Crypto Council for Innovation have sued Illinois to block a new 0.2% tax on digital asset activity before it takes effect on January 1, 2027.
The groups filed their complaint on August 21 in Sangamon County Circuit Court and are seeking preliminary and permanent injunctions. The case is the second crypto-industry challenge to the Digital Asset Tax Act after The Digital Chamber filed a separate lawsuit in July.
Illinois Will Tax Covered Crypto Activity at 0.2%
The law imposes a tax equal to 0.2% of the value of digital assets involved when an Illinois customer receives covered digital asset business activity, including exchanges, transfers, and storage.
Its definition of a transfer includes moving digital assets between accounts or storage controlled by the same customer, meaning ownership does not necessarily have to change for an activity to fall within the statute.
Brokers generally collect the tax from customers. If a broker does not charge it, the statute can require the customer to self-assess and remit the tax directly to the Illinois Department of Revenue.
Seven Claims Challenge Tax, Broker Rules and Legislative Process
The Blockchain Association and CCI raise seven claims under federal and Illinois law. They allege violations of the Internet Tax Freedom Act, dormant Commerce Clause, federal and state due process protections and the Illinois Constitution’s Uniformity Clause.
The complaint also raises a nondelegation challenge because Illinois defines digital asset brokers partly by reference to federal tax law and future Treasury regulations. Two additional counts challenge how the legislation passed under Illinois’ three-readings and single-subject requirements.
The plaintiffs also point to uncertainty around a $100,000 Illinois receipts threshold. The statute uses it when determining whether certain brokers maintain a place of business in Illinois, while other registration, collection and recordkeeping provisions do not consistently include the same threshold.
Repeal Bill Remains Pending Before January 2027 Start
The lawsuit does not suspend the tax by itself. Unless a court grants relief or lawmakers repeal the statute, its requirements begin January 1.
Republican Representative John Cabello introduced House Bill 5798 on June 22 to repeal the Digital Asset Tax Act. The bill has since added two co-sponsors but has not advanced beyond its initial filing stage.
The Blockchain Association and CCI are now seeking early court relief before brokers and customers become subject to the tax in 2027.
