Illinois Crypto Tax Draws Unlikely Alliance of DOJ, Banks and DeFi - Yahoo Finance

The groups filed briefs this month in Illinois state court supporting a lawsuit from the Crypto Council for Innovation and the Blockchain Association, which are asking a judge to strike down the state's Digital Asset Tax Act and permanently block its enforcement. The tax imposes a 0.2% levy on the full value of a digital asset every time an Illinois customer trades, transfers, or stores it through a broker, even when there's no sale, gain, or change in ownership.

Discriminatory Tax

Critics have called it among the most punitive crypto taxes in the country, in part because Illinois imposes no comparable tax on dollars, gold, stocks or any other asset, and no other state has anything like it. On Nov. 6, the Justice Department filed a statement of interest arguing the tax undermines federal policy and U.S. leadership in digital assets.

Broad Opposition

The U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association, which represents hundreds of broker-dealers, banks and asset managers, filed an amicus brief warning the tax reaches well beyond crypto-native platforms to traditional banks, custodians and advisers. A separate brief brought together crypto's heavy hitters including Andreessen Horowitz, Paradigm and Uniswap, noting an estimated 2.64 million Illinoisans hold digital assets.

Legal Battle Timeline

The challenge dates to August. As Decrypt reported, Illinois agreed in October to pause the tax until July 1, 2027, buying time for the court fight now underway. The coalition argues 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.