Digital Chamber Takes Illinois to Court Over Controversial Crypto Tax Plan

Illinois introduced a 0.2% tax on cryptocurrency transactions last month, with the new levy scheduled to take effect next year.

A crypto industry advocacy group has filed a lawsuit against Illinois, challenging a digital asset tax provision that was added to the state’s budget legislation at the last minute.

The Digital Chamber argued that Illinois’ Digital Asset Tax Act violates both the U.S. Constitution and Illinois Constitution, while also conflicting with federal tax rules. The lawsuit, filed Tuesday, seeks a federal court order preventing the state from enforcing the measure.

According to the complaint, the tax violates Illinois’ constitutional requirements for uniform taxation and due process, as well as the U.S. Constitution’s Commerce Clause and the Internet Tax Freedom Act by imposing a special tax on digital asset transactions.

The Digital Asset Tax Act was approved shortly before the Illinois legislative session ended for the year. The 0.2% tax applies to companies operating in Illinois or providing digital asset-related services with gross receipts exceeding $100,000. The measure is set to begin in January.

The Digital Chamber’s lawsuit argues that the Internet Tax Freedom Act established a principle that electronic commerce should not face discriminatory taxation from state or local governments.

The filing further claims that the law fails to differentiate between gains and losses, profitable and unprofitable transactions, realized and unrealized value changes, or ownership transfers versus non-ownership transfers. Instead, it allegedly separates traditional financial systems from blockchain-based infrastructure.

The complaint argues that federal law recognizes a difference between an asset itself and the technology used to record ownership of that asset. It states that no other legal framework creates a distinction based solely on the underlying technology used for recordkeeping.

Filed on behalf of Digital Chamber members, the lawsuit asks the court to declare the crypto tax unconstitutional under both state and federal law, prevent Illinois from enforcing the legislation, and award legal costs and fees to the organization.