The Blockchain Association and Crypto Council for Innovation sued Illinois on Aug. 21 to block a 0.2% digital asset tax scheduled to take effect on Jan. 1, 2027.
Summary
- Two industry groups sued Illinois to block its 0.2% digital asset tax before implementation begins.
- The tax takes effect January 1, 2027, covering specified exchanges, transfers and storage services statewide.
- Plaintiffs allege seven federal and state legal violations, including discriminatory internet taxation and vagueness claims.
- The complaint seeks preliminary and permanent injunctions, but no court has blocked enforcement yet statewide.
- Illinois House Bill 5798 proposes complete repeal but has not advanced beyond its filing stage.
The complaint was filed in the Seventh Judicial Circuit Court in Sangamon County. It names Illinois Revenue Director David Harris, Attorney General Kwame Raoul and Sangamon County State’s Attorney John Milhiser as defendants in their official capacities.
The filing is the second industry lawsuit challenging the Illinois crypto tax. The Digital Chamber brought a separate case in July.
Illinois crypto tax covers transactions and custody
Illinois Public Act 104-468 imposes a 0.2% tax on the value of digital assets involved in covered activity. The statute defines that activity as specified exchanges, transfers or storage provided to customers in Illinois.
The tax is based on an asset’s value rather than a customer’s profit or the fee earned by a broker. Consequently, a transfer between wallets controlled by the same customer could fall within the statutory definition even when no sale occurs.
Brokers must register and begin collecting the tax by Jan. 1. Initial remittances would become due in February 2027, according to the complaint.
One provision treats a broker with at least $100,000 in qualifying Illinois receipts during the previous 12 months as maintaining a place of business in the state. However, the plaintiffs argue that other collection and registration provisions lack that threshold, creating uncertainty about which companies must comply.
Lawsuit presents seven claims against Illinois
The complaint alleges that the tax violates the federal Internet Tax Freedom Act by treating online digital asset activity differently from comparable transactions involving stocks, cash or gold.
It also alleges violations of the dormant Commerce Clause and federal and Illinois due process protections. The plaintiffs argue that undefined terms involving valuation, storage and business presence make the law too vague to enforce fairly.
Additional counts invoke the Illinois Constitution’s Uniformity Clause and restrictions on delegating state taxing authority. The groups also challenge the process used to enact the 1,624-page budget package, citing its three-readings and single-subject requirements.
These are allegations rather than judicial findings. Illinois has not yet filed a publicly available response addressing the new complaint’s claims.
“This tax singles out digital assets for uniquely punitive treatment,” CCI CEO Ji Hun Kim said. Whether that treatment is legally discriminatory remains for the court to decide.
The plaintiffs seek a declaration that the Digital Asset Tax Act is invalid. They also requested preliminary and permanent injunctions preventing Illinois officials from implementing or enforcing it.
Second lawsuit increases pressure before 2027
The Digital Chamber filed the first Sangamon County challenge on July 21. As crypto.news previously reported, that case also argues the tax unlawfully targets blockchain transactions while leaving comparable traditional financial activity untaxed.
The two complaints have separate plaintiffs and are not automatically a single proceeding. No publicly available order has consolidated them or established a joint litigation schedule.
The complaint published by the Blockchain Association and CCI also leaves its case-number field blank. No hearing date or briefing deadline was identified in the plaintiffs’ public materials.
The filing itself does not suspend the law. Unless a court grants an injunction or legislators repeal it, companies must continue preparing for the January effective date.
The state has estimated that the tax could generate approximately $60 million annually. That remains a budget estimate rather than guaranteed revenue, particularly while enforcement faces litigation and a possible legislative repeal.
Court action or repeal could stop the tax
The immediate legal question is whether the plaintiffs can obtain preliminary relief before Jan. 1. They must persuade the court that they meet Illinois requirements for an injunction, including showing likely legal success and irreparable harm without early intervention.
Illinois lawmakers have another route available. Republican state Representative John Cabello introduced House Bill 5798 on June 22 to repeal the Digital Asset Tax Act immediately.
Official records show that HB 5798 has not advanced beyond its filing stage. It has received no committee vote or floor vote.
Businesses therefore face three possible developments before 2027: an injunction, legislative repeal or continued implementation. The next court filings should establish Illinois’ defense and whether the plaintiffs will receive an expedited hearing.
