Digital Chamber Sues Illinois to Block 0.2% Digital Asset Tax

Highlights:

• Digital Chamber sued Illinois to block a 0.2% tax on certain digital asset business activities.
• The group argues the law unfairly taxes blockchain transactions while comparable traditional finance activity remains untaxed.
• The tax begins January 1, 2027, unless the court blocks enforcement or lawmakers approve repeal legislation.

The Digital Chamber has filed a lawsuit seeking to block Illinois’ new Digital Asset Tax Act before it takes effect on January 1, 2027. The trade association filed the case in the Circuit Court of Sangamon County on July 21. According to journalist Eleanor Terrett, it is the first trade association to challenge the law in court. 

The lawsuit asks the court to declare the tax unconstitutional and prevent state officials from implementing or enforcing it. Illinois Department of Revenue Director David Harris and Attorney General Kwame Raoul are named as defendants in their official roles.

🚨NEW: @DigitalChamber has become the first trade association to sue over Illinois’ new Digital Asset Tax Act, filing a lawsuit seeking to block the nation’s first state tax targeting crypto business activity before it takes effect on January 1, 2027.

The complaint argues the… https://t.co/2CboR4H6th

— Eleanor Terrett (@EleanorTerrett) July 21, 2026

What the Illinois Digital Asset Tax Act Covers

Illinois lawmakers passed Senate Bill 3019 on June 1. Governor J.B. Pritzker signed it on June 16 as Public Act 104-0468. The Digital Asset Tax Act was included as Article 3 of the wider state revenue and budget legislation.

Starting January 1, 2027, Illinois customers would face a tax equal to 0.2% of the digital asset’s value related to that activity. Covered activity includes exchanging, transferring or storing digital assets through a digital asset broker. According to the complaint, the tax may apply even when an investor earns no profit or keeps ownership of the asset. Moving Bitcoin between accounts held by the same person, for example, could create separate taxable events for the transfer and the new storage arrangement.

🔔 Illinois Governor Pritzker signs digital asset tax into law, Crypto supporters say this could force developers and businesses to leave the state. pic.twitter.com/T0RJWYHyzG

— Crypto Dyl News (@cryptodylnews) June 17, 2026

Brokers must collect the tax and send it to the Illinois Department of Revenue. They must also register before operating as digital asset brokers in the state. The collection requirement applies to businesses with an Illinois presence or at least $100,000 in quarterly gross receipts from digital asset activity involving Illinois customers. Failure to comply can be treated as a Class 3 felony.

However, the Digital Chamber says the law does not clearly explain how asset value should be measured, what counts as storage, or when one blockchain operation becomes several taxable events. Illinois has also not issued implementing rules or guidance on these questions.

Digital Chamber Alleges Unequal Tax Treatment

The Digital Chamber argues that Illinois is taxing the technology used to record and transfer ownership rather than the economic activity itself. The complaint compares tokenized Treasury securities, stablecoins and tokenized stocks with equivalent assets handled through banks, brokerages and other traditional financial systems.

For example, a tokenized Treasury security could face tax when it is exchanged, transferred or stored, while a similar Treasury security held through a traditional custodian would not. The group claims this difference violates the Illinois Constitution and the U.S. Constitution’s Commerce Clause. It also argues that the law is preempted by the federal Internet Tax Freedom Act.

Digital Chamber CEO Cody Carbone said taxes should be assessed based on both the revenue they generate and the fairness of the burden. He added that the provision was inserted into wider budget legislation shortly before lawmakers gave the bill final approval.

Court Challenge Begins Before Tax Takes Effect

The Digital Chamber said some of its members are already spending money to prepare systems for the new tax. Its members include crypto exchanges, custodians, payment companies, stablecoin issuers, financial institutions and blockchain infrastructure providers.

The case is a pre-enforcement challenge filed before Illinois begins collecting the tax. A separate proposal, House Bill 5798, has also been introduced to repeal the Digital Asset Tax Act, but it remains pending, according to the complaint.