Crypto Advocacy Groups Sue Illinois Over 0.2% Digital Asset Tax

The Crypto Council for Innovation (CCI) and the Blockchain Association (BA) filed a lawsuit Friday in the Circuit Court of the Seventh Judicial Circuit for Sangamon County, challenging Illinois' 0.2% tax on cryptocurrency transactions set to take effect in January 2027. The digital asset advocacy groups argued that the tax, signed into law by Governor JB Pritzker in June as part of the state's fiscal year 2027 budget, violated the US Constitution, the Illinois constitution, federal and state due process laws, and the federal Internet Tax Freedom Act.

The groups raised constitutional objections on multiple grounds, including claims that the tax violated the Commerce Clause by creating "the specter of duplicative taxation" across state lines. They also argued the measure was "unconstitutionally vague," placing the burden on residents and brokers to determine which assets and transactions fell under the tax regime "under the threat of serious civil and criminal penalties." Unlike traditional income-based taxation, the Illinois levy applies to transaction volume, classifying crypto users under a "privilege tax" framework.

"States have an important role to play in fostering innovation, but that authority has constitutional limits," said Summer Mersinger, CEO of the Blockchain Association and former commissioner at the US Commodity Futures Trading Commission. "Illinois cannot impose a novel tax regime that discriminates against digital commerce, creates uncertainty for consumers and businesses, and threatens to fragment a rapidly growing national market." The lawsuit follows a similar July filing by the Digital Chamber, which argued the Illinois tax "discriminates against people who transact in digital assets."

The legal challenges come amid broader tensions between state regulators and the digital asset industry during an election year where crypto policy has become a significant political issue. Illinois is also facing a separate lawsuit from prediction market platform Kalshi over a state law that took effect July 1 banning certain sports event contracts. Together, the suits highlight how crypto and blockchain-aligned organizations are increasingly turning to the courts to push back against state-level legislation they view as overreaching.