Two leading cryptocurrency trade organizations have asked an Illinois court to issue a preliminary injunction preventing the state from enforcing its new 0.2 percent tax on digital asset transactions. The motion aims to pause the measure while a broader legal challenge continues, ahead of the tax’s scheduled effective date of January 1, 2027.

The Crypto Council for Innovation and the Blockchain Association filed the request in the Circuit Court of Sangamon County. The groups previously sued the state over the law and now seek immediate relief to avoid what they describe as irreversible costs and operational disruption for companies that serve Illinois customers.

Details of the Digital Asset Tax

Illinois Governor JB Pritzker signed the Digital Asset Tax Act into law in June as part of the state’s fiscal year 2027 budget. The measure is structured as a privilege tax applied to the value of covered digital asset activity, including exchanges, transfers, and storage conducted through a broker for Illinois customers.

Out-of-state brokers generally become subject to the collection requirements once they generate at least $100,000 in gross receipts from Illinois digital asset activity in the prior 12 months. The state projects the levy will produce about $60 million in annual revenue. Unlike capital gains or income taxes, the tax is based on transaction volume and activity rather than realized profits.

The law also includes registration, recordkeeping, and reporting obligations. Certain violations, such as failure to register or maintain required records, can carry Class 3 felony penalties under Illinois law.

Arguments for Immediate Relief

In their motion, the organizations contend that companies already face substantial pressure to design and implement compliance systems without clear guidance on key questions, including precisely which activities trigger the tax, how asset values should be determined, and how customer location is established. They argue that a single sequence of exchange, transfer, and storage could potentially be taxed multiple times under the current wording.

The groups maintain that these near-term expenditures, made under the threat of criminal sanctions, constitute irreparable harm that cannot be undone even if the tax is later struck down. They further assert that the statute discriminates against digital asset activities compared with traditional financial services, which generally are not subject to comparable transaction-based levies beyond income or capital gains treatment.

The organizations also claim the law was enacted with limited deliberation. They note that the relevant provisions appeared publicly only on the final day of the legislative session as part of a large omnibus budget bill exceeding 1,600 pages.

Constitutional and Statutory Claims

The underlying lawsuit, filed earlier by the same groups, alleges violations of the U.S. Constitution, the Illinois Constitution, federal and state due process protections, the dormant Commerce Clause, and the federal Internet Tax Freedom Act. A parallel challenge was previously brought by the Digital Chamber.

The trade groups argue that the tax improperly targets internet-based commerce and interstate activity while treating digital assets differently from other forms of intangible personal property and financial instruments. They say Illinois sales and use tax rules generally do not reach comparable activities involving traditional financial assets.

Blockchain Association representatives have also pointed to the disparity between the projected revenue and the scale of the state’s overall budget appropriations, arguing that delaying enforcement would impose minimal cost on the state while avoiding significant disruption for businesses and customers.

Broader Context and Next Steps

The injunction request forms part of a wider set of legal actions involving Illinois regulation of digital assets and related markets. Separate litigation has been filed over state restrictions on prediction markets, including a challenge by Kalshi to a law that took effect in July limiting certain event contracts.

The Sangamon County Circuit Court must now determine whether the plaintiffs meet the legal standard for preliminary injunctive relief, which typically requires a showing of likelihood of success on the merits and irreparable harm. A decision granting the injunction would keep the 0.2 percent tax from taking effect while the constitutional claims proceed. A denial would leave companies facing the January 2027 compliance deadline under the existing statute.

Industry participants continue to monitor the case closely, given its potential implications for how other states approach taxation of digital asset activity.