Illinois is now fighting a second lawsuit over its first-in-the-nation crypto transaction tax, after the Crypto Council for Innovation and the Blockchain Association filed suit on Friday challenging the state's Digital Asset Tax Act. The two trade groups argue the law violates the U.S. Constitution, the Illinois Constitution, and the federal Internet Tax Freedom Act.
The law imposes a 0.2% tax on "digital asset business activity," covering the exchanging, transferring, or storing of digital assets, and takes effect January 1, 2027. Governor JB Pritzker signed it in mid-June as part of Illinois's roughly $55.9 billion fiscal 2027 budget, and both advocacy groups had lobbied for its repeal before it was enacted.
The core constitutional argument
Central to the new complaint is the claim that Illinois is taxing a technology, not a transaction.
"This tax singles out digital assets for uniquely punitive treatment based on the underlying technology rather than the substance of the transaction itself," said Ji Kim, who leads the Crypto Council for Innovation.
The filing states the law "distinguishes only between traditional financial infrastructure and blockchain infrastructure," taxing blockchain-based transfers while leaving functionally identical activity conducted through conventional financial rails untouched. Blockchain Association CEO Summer Mersinger joined Kim in a statement accompanying the groups' own announcement of the filing.
Illinois's law is already under a separate legal challenge
This is not the tax's first day in court. The Digital Chamber filed its own complaint against the Digital Asset Tax Act in July 2026, arguing similar constitutional grounds, meaning Illinois is now defending the statute on two separate fronts before it has even taken effect. Illinois would be the first U.S. state to impose a dedicated transaction-level tax on digital asset activity, a distinction that has drawn national attention from an industry already navigating a patchwork of state-level rules.
For context on how federal regulators are approaching crypto oversight on a separate track, see CFTC Chair Selig: Crypto Rules Are Coming, With or Without Clarity Act.
Related: UK Tax Authority Triples Crypto Warning Letters to Over 81,000
What happens next
With two lawsuits now pending, Illinois faces pressure to defend the tax's constitutionality well before its January 2027 start date. A ruling against the state could chill similar proposals in other statehouses that have floated blockchain-specific levies; a ruling upholding it could hand states a template for taxing crypto activity outside traditional financial regulation.
