Illinois Crypto Tax Draws Unlikely Alliance of DOJ, Banks and DeFi
Illinois’ Digital Asset Tax Act, which levies a 0.2% fee on the full value of a digital asset for every trade, transfer, or storage, faces a legal challenge backed by a broad coalition including the U.S. Justice Department, major banks, and leading crypto firms.
The lawsuit targets the state’s Digital Asset Tax Act, which applies a 0.2% levy on the full value of a digital asset each time an Illinois customer trades, transfers, or stores it through a broker, even when there is no sale, gain, or change in ownership.
Critics have called it among the most punitive crypto taxes in the country, noting that Illinois imposes no comparable tax on dollars, gold, or stocks, and no other state has a similar measure.
Illinois agreed in October to pause the tax until July 1, 2027, providing a temporary reprieve while the legal challenge proceeds.
Federal and industry opposition
The U.S. Justice Department filed a statement of interest in November, arguing that the tax undermines federal policy and U.S. leadership in digital assets. The DOJ called the law vague and discriminatory for singling out crypto for treatment no other asset faces.
The U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association (SIFMA), which represents hundreds of broker-dealers, banks, and asset managers, filed an amicus brief warning that the tax reaches well beyond crypto-native platforms to traditional banks, custodians, and advisers offering digital asset products.
A separate brief filed on November 11 brought together crypto’s heavy hitters, led by the DeFi Education Fund, Andreessen Horowitz, Paradigm, and Uniswap, and including Aave Labs, Chainlink Labs, Solana Policy Institute, Phantom, Jito Labs, Multicoin Capital, and Stand With Crypto.
"This tax is unclear, discriminatory, unconstitutional, and harmful to the future of finance," said Ji Hun Kim, CEO of the Crypto Council for Innovation, and Ashok Pinto, an executive at the Blockchain Association, in a joint statement.
Vague definitions and scope
The coalition’s brief argues that the law’s definitions are so vague they could stretch to software developers and decentralized protocols that hold no customer funds and have no way to identify users or know where a transaction occurred.
The filing noted that an estimated 2.64 million Illinoisans hold digital assets, the fifth-highest total of any state, highlighting the law’s potential impact on a significant portion of the population.
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