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Crypto Groups Sue Illinois Over 0.2% Tax Set for Jan. 1, 2027
Blockchain Association and Crypto Council for Innovation sue Illinois over a 0.2% digital asset tax. The complaint says the levy hits swaps, transfers and custody, not just profits. A Jan. 1, 2027 start date is in play.
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Two heavyweight crypto trade groups have dragged Illinois into court over a first-in-the-nation 0.2% tax that could hammer digital asset trades, transfers, and storage when it kicks in Jan. 1, 2027.
The Blockchain Association and Crypto Council for Innovation filed the complaint on Aug. 21 in Sangamon County Circuit Court against Illinois Department of Revenue Director David Harris, Attorney General Kwame Raoul, and Sangamon County State’s Attorney John Milhiser. They want the Digital Asset Tax Act declared unlawful and preliminary and permanent injunctions blocking enforcement.
The battle starts with how Illinois calculates the levy. Rather than taxing a customer’s profit, the law grabs 0.2% of the digital asset’s value when certain activities run through a digital asset broker. The complaint says the tax can hit even when a customer “buys nothing, sells nothing, gains nothing, and transfers no ownership.”
That means swapping bitcoin, shifting it between accounts or paying a company to custody it could trigger tax. The complaint says Illinois previously treated digital assets much like other financial property for tax purposes, with income or capital gains potentially taxable, while the transaction or custody service generally stayed untouched. That changes Jan. 1.
That gap sits at the heart of the case. Illinois does not slap an equivalent transaction tax on someone buying stock, wiring money between personal accounts or storing cash, gold or securities with a bank or broker. Plaintiffs say the state is effectively taxing the rails used to hold or move value instead of the actual economic transaction.
Things get uglier when a platform performs several services at once. A crypto purchase can involve an exchange, a transfer into the customer’s account and ongoing custody by the platform. The complaint says the law never clearly answers whether that ordinary sequence creates one, two or three taxable events.
Custody creates another headache because storage runs continuously instead of happening once. The filing says the state of Illinois never explains whether a year of custody counts as one taxable occurrence, whether every billing period creates another or whether a changing account balance starts a fresh one. According to the complaint, the answer could swing tax bills “by orders of magnitude.”