CoinDesk
The Crypto Council for Innovation and the Blockchain Association filed a motion for a preliminary injunction in Sangamon County Circuit Court on Wednesday, asking a judge to freeze Illinois' new 0.2% Digital Asset Tax Law before it takes effect on Jan. 1, 2027. The two groups argue that member companies are already suffering irreparable harm by being forced to build compliance systems for a law they say violates federal statute and the Constitution.
Why it matters
The legal challenge rests on two pillars: the Internet Tax Freedom Act and constitutional preemption. The industry contends that Illinois is singling out digital assets for treatment that no other financial service faces in the state, noting that Illinois' existing sales and use taxes exempt intangible personal property, money, and precious metals. CCI CEO Ji Hun Kim said companies are being asked to spend millions to build systems for a tax that "violates their Constitutional rights without answers to basic questions about what is taxed and when." Blockchain Association CEO Summer Mersinger added that Illinois would not be able to use any projected revenue during the litigation anyway, so the state "loses very little by waiting."
Market impact
The stakes extend well beyond Illinois. Mersinger warned directly that if the law survives, other states will follow: "Illinois will not be the last state to try it." A ruling against the injunction would effectively greenlight a new category of state-level crypto transaction tax, adding compliance cost and regulatory fragmentation across every venue serving US customers. The outcome of this case is a meaningful watch item for any operator with US exposure.
Frequently asked questions
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What exactly does Illinois' Digital Asset Tax Law impose on crypto businesses?
The law levies a 0.2% tax on gross receipts from digital asset transactions for any entity based in Illinois or providing services in the state with receipts over $100,000. It is scheduled to take effect on Jan. 1, 2027.
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Why are the lobbying groups arguing the tax is unconstitutional?
They contend the Internet Tax Freedom Act and the US Constitution preempt the Illinois law, and that the state is unlawfully singling out digital assets while exempting other intangible financial assets, money, and precious metals from its sales and use taxes.
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What is a preliminary injunction and why are they seeking one now?
A preliminary injunction would pause enforcement of the law while the underlying lawsuit proceeds. The groups argue the harm of building costly compliance systems is already occurring and is irreversible, meeting the legal threshold for emergency relief.
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How much could compliance with the Illinois tax cost affected companies?
CCI CEO Ji Hun Kim stated that companies are being asked to spend millions of dollars building compliance systems, even before the tax takes effect and before basic questions about its scope have been answered.
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What is the broader risk if Illinois prevails in this legal fight?
Blockchain Association CEO Summer Mersinger warned that if the law is upheld, other states will use it as a model, potentially triggering a wave of similar state-level crypto transaction taxes that would add compliance costs and regulatory fragmentation for every US-facing operator.
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