CoinDesk
Two major crypto trade associations sued Illinois on Friday over its recently enacted 0.2% digital asset tax, joining the Digital Chamber's earlier challenge and turning a state-level dispute into a unified industry test case. The Crypto Council for Innovation and the Blockchain Association filed in Sangamon County, alleging the levy violates the U.S. Constitution, the Illinois Constitution, and the Internet Tax Freedom Act.
Why it matters
The lawsuit targets a tax that applies to crypto firms operating in or serving Illinois residents with more than $100,000 in total receipts, regardless of whether the underlying transactions turned a profit. "This tax singles out digital assets for uniquely punitive treatment based on the underlying technology rather than the substance of the transaction itself," said Ji Kim, general counsel of the Crypto Council for Innovation, in a statement. Blockchain Association CEO Summer Mersinger added that Illinois "cannot impose a novel tax regime that discriminates against digital commerce" or "threatens to fragment a rapidly growing national market."
The Internet Tax Freedom Act claim is the legal lever that could lift the case beyond Illinois. If a court agrees that the levy discriminates against internet-based commerce, the precedent would shape how other states approach crypto taxation, and arguably any digital financial service the state wants to single out.
Market impact
The tax is estimated to raise roughly $60 million for the state budget, a modest figure that critics argue makes the structural legal fight worth picking. Because the levy applies to transaction volume rather than net gains, it hits firms even when their customers are losing money on the underlying trades, raising operating-cost concerns for any custody, exchange, or on/off-ramp business domiciled in the state or serving its residents. With three industry groups now aligned against the measure, the case becomes harder for Illinois to settle quietly and more likely to set a binding precedent on whether digital assets can be taxed differently from traditional finance.
Frequently asked questions
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What does the Illinois crypto tax actually do?
It imposes a 0.2% levy on crypto businesses operating in Illinois or serving Illinois customers with more than $100,000 in receipts, applied to transaction volume rather than net gains.
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Who is challenging the Illinois crypto tax?
Three trade associations have now filed suit: the Digital Chamber last month, and the Crypto Council for Innovation and the Blockchain Association on Friday. All argue the levy is unconstitutional.
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How much revenue is the Illinois crypto tax expected to raise?
The tax is estimated to bring in roughly $60 million for the state budget, a modest figure compared with the structural legal fight it has now triggered.
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Why is the Illinois crypto tax controversial beyond its dollar amount?
Because it taxes transaction volume rather than profitability, the levy hits firms even on losing trades, raising concerns about discriminatory treatment of digital assets versus traditional finance.
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Could the Illinois lawsuit set a national precedent?
Industry groups are invoking the Internet Tax Freedom Act alongside constitutional claims, a legal theory that, if successful, could shape how other states approach crypto taxation.
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