TDC sues Illinois over a 0.2% digital asset tax passed last month, arguing it violates federal internet tax law and the state constitution. The law takes effect January 2026.
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A crypto lobbying organization has sued the state of Illinois over a last-minute tax provision inserted into the state budget last month.
The Digital Chamber, known as TDC, alleged that the state's Digital Asset Tax Act violated both the U.S. and Illinois constitutions and is preempted by a federal tax law. The lawsuit, filed Tuesday, asks a federal judge to block the state from enforcing the tax.
The tax violates the Illinois constitution's uniformity and due process clauses, the Commerce Clause of the U.S. Constitution and the Internet Tax Freedom Act by singling out digital asset transactions, the suit said.
The Digital Asset Tax Act passed on short notice last month, just before the state government wrapped up its session for the year. The 0.2% tax applies to any entity based in Illinois or providing services with gross receipts over $100,000. It takes effect in January.
TDC's lawsuit said the Internet Tax Freedom Act alone created a rule that "electronic commerce would not be subjected to discriminatory state and local taxation."
"The Act does not distinguish between gains and losses, between profitable and unprofitable transactions, between realized and unrealized appreciation, or between transfers that change ownership and transfers that do not. It distinguishes only between traditional financial infrastructure and blockchain infrastructure," the filing said.
Federal law makes a distinction between what an asset represents "from the infrastructure used to record them," the filing said. No other body of law makes a distinction tied to what technology records ownership, it added.
The lawsuit, brought on behalf of TDC's members, asks a state judge to rule that the crypto tax violates state and federal constitutions, block the state from enacting the law and award fees and costs to TDC.
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