The Digital Chamber sues to block Illinois' 0.2% crypto transaction tax, calling it unconstitutional. The case may influence how other states tax digital assets.
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The Digital Chamber filed a federal lawsuit Tuesday challenging Illinois' new Digital Asset Tax Act, arguing the 0.2% levy on digital asset transactions is unconstitutional. The group wants the court to block the tax before it takes effect in January.
The law, passed in the final days of the legislative session, applies to businesses headquartered in Illinois or serving the state with more than $100,000 in gross receipts. It imposes a 0.2% tax on digital asset transactions, defined by whether they use blockchain technology.
The lawsuit claims the tax violates the Illinois Constitution's uniformity and due process clauses, the Commerce Clause of the U.S. Constitution, and the federal Internet Tax Freedom Act. The Digital Chamber argues the measure unfairly singles out blockchain-based transactions while leaving traditional financial infrastructure untouched.
"The legislation does not account for whether a transaction generates a profit or loss," the complaint said. "It focuses solely on whether blockchain technology is used to record or process the transaction."
The group further contends that federal law distinguishes digital assets by the assets themselves, not the technology used to record ownership. No comparable framework imposes different tax treatment based on the infrastructure supporting a financial transaction, the Digital Chamber argued.
The lawsuit also argues the tax violates the Internet Tax Freedom Act, which prohibits states from imposing discriminatory taxes on electronic commerce. The Digital Chamber said blockchain transactions qualify as electronic commerce under the act, and the Illinois tax singles them out for unfavorable treatment.
The law defines digital assets broadly, including cryptocurrencies, tokens, and other blockchain-based assets, the lawsuit said.
The case is part of a broader pattern of state-level crypto regulation that could affect crypto market analysis. If the court grants an injunction, Illinois would be blocked from enforcing the tax while the legal challenge proceeds. A ruling in favor of the state could encourage other states to adopt similar transaction-based taxes on digital assets, the Digital Chamber said.
The Digital Chamber filed the suit on behalf of its members and is seeking a declaration that the law is unconstitutional, along with an injunction and legal fees. The court has not yet set a hearing date for the injunction request.
The Illinois Department of Revenue did not immediately respond to a request for comment.
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