Illinois Signs 'Most Punitive' Crypto Tax, Industry Fights Back

Illinois Governor JB Pritzker signed a law imposing a 0.2% tax on digital asset services. The tax applies to exchange and custody activities, according to the Crypto Council for Innovation (CCI).

The CCI sent Pritzker a letter Tuesday asking for a line-item veto on the Digital Asset Privilege Tax Act. No other state has adopted a transaction-based tax like this one, the group said. Illinois does not impose a similar tax on stocks, bonds or derivatives.

In a LinkedIn post sharing the letter, the CCI called it "the most punitive digital asset tax in the country into law."

CoinDesk reported Wednesday the tax was added as a last-minute provision to the state's broader budget bill. It takes effect Jan. 1. The Illinois legislature is out of session for the rest of the year. Pritzker could issue a line-item veto during a fall veto session. The timing is uncertain, CoinDesk reported.

The law applies to firms based in Illinois or that provide services to its residents, with total gross receipts of at least $100,000.

The Illinois Blockchain Association and the Digital Chamber sent a letter June 3 opposing the 0.2% tax on crypto transactions. The Illinois Blockchain Association posted on LinkedIn that the Digital Asset Privilege Tax is "a punitive, discriminatory measure rushed through in the dark of night that will drive businesses and jobs to competing states."

The structure matters for anyone running a crypto-related business in Illinois. A 0.2% tax on gross receipts from digital asset services is a cost on revenue, leaving net profit untouched. For a firm processing $50 million in trades a year, that's $100,000 in tax liability. That sum comes before salaries and rent. Compliance costs add more.

The Illinois Blockchain Association represents roughly 60 member firms. The Digital Chamber counts over 100 member organizations with some Illinois exposure. Both groups have been pressing the governor's office since the provision was first added in late May. The fall veto session is the next real window for a challenge.

Taxes on gross receipts are rare in U.S. state policy outside specific industries like insurance. Applying a 0.2% transaction-level tax to crypto alone creates a compliance burden even for firms that could absorb the direct cost. They must track every client transaction for taxable events and reconcile across wallets. They then file under a new regime with no precedent for audits or enforcement.

For traders who already face state income tax on capital gains from crypto sales, the new privilege tax stacks on top. A resident who buys bitcoin through a local exchange, later sells at a profit, and uses a custody service in Illinois could owe both the capital gains tax and the 0.2% tax on the custody and exchange services themselves.

For firms considering Illinois, the tax adds a new cost layer that could shift operations to other states, as seen in broader crypto market analysis.

The governor's office has not commented since the signing. The Illinois Blockchain Association said it would continue lobbying during the veto session. Pritzker's decision on the line-item veto will determine whether the tax stands or goes back to the legislature for a potential override vote next year.