Two leading cryptocurrency trade associations have filed a lawsuit seeking to stop Illinois from enforcing a new 0.2 percent tax on digital assets. The Blockchain Association and the Crypto Council for Innovation brought the case on August 21 in Sangamon County Circuit Court against state revenue and law enforcement officials.

The suit targets the Digital Asset Tax Act, which is scheduled to take effect on January 1, 2027. The measure would impose a 0.2 percent levy on the value of digital assets whenever they are exchanged, transferred or held in custody by brokers that serve Illinois customers and report more than $100,000 in receipts. State projections estimate the tax could generate about $60 million annually.

How the Tax Would Work

Unlike traditional capital gains or income taxes, the Illinois levy applies to the asset's value at the time of certain broker-handled activities. Plaintiffs argue it can be triggered even when a customer buys nothing, sells nothing, realizes no gain and transfers no ownership. Swapping one cryptocurrency for another, moving assets between accounts or paying a firm to hold them could all create taxable events.

The complaint notes that Illinois has previously treated digital assets similarly to other financial property for tax purposes. Income or capital gains could be taxed, but the underlying transaction or custody service itself generally was not. That approach changes under the new law.

Platforms that perform multiple functions in a single customer interaction face added uncertainty. A typical purchase may involve an exchange, a transfer into the customer's account and ongoing custody. The statute does not clearly state whether that sequence produces one taxable event or several. Continuous custody raises further questions: whether a full year counts as a single occurrence, whether each billing period creates another, or whether a fluctuating balance starts a new one. Plaintiffs say the answers could alter tax liability by orders of magnitude.

Valuation rules are also unclear. The law does not specify whether an asset's taxable value is measured when an instruction is submitted, when a broker executes it, or when the transaction settles. Location determinations rely on account records, mailing addresses, IP data and similar indicators that can create a presumption of Illinois residency. Brokers must then prove otherwise, and conflicting information leaves firms exposed to civil and criminal penalties for errors.

Constitutional and Procedural Challenges

The lawsuit advances multiple claims under federal and state law. Plaintiffs contend the tax violates the federal Internet Tax Freedom Act by treating electronic commerce differently from equivalent offline activity. They also argue it runs afoul of the dormant Commerce Clause by burdening interstate commerce, and that it breaches due-process protections under both the federal and Illinois constitutions.

State-level claims include violations of the Illinois Uniformity Clause, which requires equal treatment of similar property, and challenges to the legislative process itself. Senate Bill 3019 began as a two-page agricultural-finance measure. On the final day of the legislative session, it was expanded into a 1,624-page package that included the digital asset tax, a digital advertising tax and a social media fee. The digital asset provisions occupied fewer than 20 pages of the final text. Lawmakers provided roughly an hour of notice for committee hearings, and both chambers passed the bill within 24 hours.

Plaintiffs say this process violated the state's Three-Readings Rule and Single-Subject Rule. They also assert that the statute improperly delegates taxing authority by relying on federal definitions of digital assets.

Earlier Lawsuit and Recent Precedent

The August 21 filing is the second industry challenge to the tax. The Chamber of Digital Commerce, representing more than 250 companies, sued Illinois in July on related grounds. Neither case has yet produced a ruling.

Four days before the latest suit, a Maryland court struck down that state's digital advertising tax. The Maryland decision rested on the Internet Tax Freedom Act, the dormant Commerce Clause and due-process principles—the same core federal arguments now raised against Illinois. Policy analysts have noted that other states with similar digital taxes are watching the outcome closely.

Illinois officials, including the Department of Revenue and the governor's office, have not issued public responses to either lawsuit. The immediate question before the Sangamon County court is whether enforcement should be blocked before brokers must register and begin collecting the tax in less than five months.

The plaintiffs seek both a declaration that the Digital Asset Tax Act is unlawful and preliminary and permanent injunctions preventing its enforcement. The case names David Harris, director of the Illinois Department of Revenue; Attorney General Kwame Raoul; and Sangamon County State's Attorney John Milhiser as defendants.