Digital Chamber of Commerce sues to block Illinois 'first 0.2% U.S. cryptocurrency tax

Illinois '0.2% tax targets the value of digital assets, not transaction profits, fees or gains.

The Digital Chamber of Commerce said the law discriminates against blockchain activities under federal and state laws. Brokers need to complete monthly declaration, location verification, valuation rule formulation and registration before January 2027. The lawsuit calls for an immediate and permanent injunction to prevent Illinois from imposing a statewide 0.2% tax.

Illinois is facing a challenge to tax digital asset activities based on transaction value rather than profits. As a result, the Digital Chamber of Commerce filed a lawsuit in Sangamon County Circuit Court on Tuesday to try to block the measure before it takes effect on January 1, 2027.

The 32-page cryptocurrency tax lawsuit names Revenue Commissioner David Harris and Attorney General Kwame Rao as defendants. The lawsuit asked the court to declare the law invalid and prevent its enforcement through temporary, preliminary and permanent injunctions.

Illinois '0.2% tax is on asset value, not investor profits

Governor JB Pritzker signed Senate Bill 3019 on June 16 as part of the state's 2027 budget plan. The measure imposes a 0.2% tax on digital assets involving transactions, transfers or storage services involving Illinois customers. Unlike capital gains tax, this tax does not depend on whether the customer is profitable, but is calculated from the value of assets during the transaction activity under the digital asset tax law.

This structure may result in higher taxes on high-value transfers than fees. For example, transferring $100,000 worth of digital assets could trigger a $200 fee, regardless of fees or outcomes. In addition, tax obligations mainly fall on digital asset brokers, including exchanges, custodians, wallet providers and companies that facilitate customer transfers. Companies with a physical presence in Illinois will directly apply the law. At the same time, out-of-state brokers will also be subject to tax liability after they generate at least $100,000 in Illino-related income over a 12-month period.

Once covered, businesses must register in the state, collect taxes separately, file monthly returns, and maintain records of transactions and customer location. To determine whether a customer is located in Illinois, brokers may rely on account details, mailing or billing addresses, Internet protocol data or other key usage metrics. However, the law still has significant uncertainties in terms of asset valuation, determination of transaction sources, and whether storage constitutes a taxable event.

Litigation challenges tax treatment against blockchain

In this context, the Digital Chamber of Commerce believes that Illinois cannot impose a separate tax simply because ownership records or transfers rely on blockchain technology. Its complaint states that economically equivalent assets should be treated equally regardless of what settlement system is used. The group also cited the federal Internet Tax Freedom Act, which restricts discriminatory state and local taxes on e-commerce. In addition, the lawsuit also filed claims based on the U.S. Constitution and the Illinois Constitution.

The lawsuit further questioned how lawmakers passed the clause. CEO Cody Caburn said the measure was incorporated into legislation overnight before final review, limiting review of its fairness and compliance requirements. In addition to the legislative process, the regulation also leaves a number of operational issues unresolved. It does not specify when volatile digital assets must be valued, nor does it say which pricing source brokers should use. In addition, the law does not clarify whether storage constitutes a single taxable event, monthly obligation, or other recurring expense. Different definitions in Illinois tax and digital asset laws may also complicate compliance with peer-to-peer and decentralized financial services.

These uncertainties contrast with the state's broader expansion of digital asset regulation. In 2025, Illinois passed consumer protection and self-service terminal legislation, giving financial regulators licensing and consumer protection powers. Unless courts or legislators intervene, brokers must have registration, valuation, collection, reporting and customer location systems ready by January 1, 2027. Therefore, the case will determine whether Illinois 'first cryptocurrency tax can pass judicial review.