The Digital Chamber filed suit in Sangamon County circuit court on July 21 against Illinois' Digital Asset Tax Act, which imposes a 0.2% tax on digital asset transactions set to take effect January 1, 2027. The lawsuit challenges the constitutionality of the tax, which Governor JB Pritzker signed into law on June 16 as part of the state's fiscal year 2027 budget and is projected to raise $60 million annually. Illinois became the first U.S. state to enact a tax specifically targeting crypto transactions, a move the industry group argues violates both state and federal constitutional provisions by discriminating against blockchain-based financial activity.
Illinois Digital Asset Tax Act Imposes 0.2% Levy on Gross Transaction Value
The Digital Asset Tax Act applies a 0.2% tax on "digital asset business activity," which includes exchanging, transferring, or storing digital assets. The law targets firms based in Illinois or serving Illinois customers with gross receipts of at least $100,000 annually. The state projects the tax will generate roughly $60 million per year once fully implemented.
The tax is calculated on gross transaction value rather than net gains. According to The Digital Chamber's complaint, the law "does not distinguish between gains and losses, between profitable and unprofitable" trades. This structure means firms owe tax on transactions regardless of whether the activity produced profit or resulted in a loss, as long as a transfer occurred.
The Digital Chamber Cites Constitutional Violations in Legal Challenge
The Digital Chamber's complaint presents three primary legal arguments against the Illinois tax. First, the organization claims the tax violates the Illinois Constitution's uniformity and due process clauses. Second, it argues the tax conflicts with the U.S. Constitution's Commerce Clause by burdening interstate commerce. Third, the complaint asserts the tax violates the federal Internet Tax Freedom Act, which generally prohibits states from taxing internet-based transactions in a discriminatory manner.
The complaint states the Illinois law "distinguishes only between traditional financial infrastructure and blockchain infrastructure," taxing digital asset activity while exempting functionally identical traditional finance transactions. The Digital Chamber's CEO Perianne Boring stated, "Today we are asking the courts to protect consumers and our members and stop this unfair tax in Illinois." The organization also notes the taxing provision "slipped into legislation the night before the bill's final consideration," limiting industry response time before passage.
Industry Groups Opposed Illinois Crypto Tax Before Enactment
When Governor Pritzker signed the bill on June 16, a16z Crypto's Miles Jennings called it "one of the most anti-crypto laws in the U.S." Both the Crypto Council for Innovation and the Illinois Blockchain Association had urged lawmakers to repeal the provision before it took effect. The state has roughly five months before the law is scheduled to take effect. No case number has been made public, and Illinois officials have not issued a public response to the complaint.
FAQ
What did The Digital Chamber file on July 21?
The Digital Chamber filed a lawsuit in Sangamon County circuit court on July 21 challenging Illinois' Digital Asset Tax Act, which imposes a 0.2% tax on digital asset transactions set to take effect January 1, 2027.
Why does The Digital Chamber argue the Illinois crypto tax is unconstitutional?
The Digital Chamber's complaint argues the tax violates the Illinois Constitution's uniformity and due process clauses, the U.S. Constitution's Commerce Clause, and the federal Internet Tax Freedom Act by discriminating against blockchain-based transactions while exempting identical traditional finance activity.
How does Illinois' 0.2% crypto tax apply to transactions?
The tax applies to firms based in Illinois or serving Illinois customers with gross receipts of at least $100,000 annually, and is calculated on gross transaction value rather than net gains, meaning firms owe tax regardless of whether transactions produced profit or loss.
