18 Crypto Firms Seek to Join Court Fight Over Illinois’ 0.2% Crypto Tax

Under Illinois’ Digital Asset Tax Act, a broker that exchanges, transfers or holds a digital asset for a customer in Illinois must collect 0.2% of the asset’s value each time. The tax, created by Public Act 104-468, is set by statute to begin Jan. 1, 2027. In October, Illinois officials and The Digital Chamber jointly asked the court to delay it to July 1, 2027, Cointelegraph reported, saying the Blockchain Association case’s status under the deal was unclear. Unchained could not confirm the court approved it. Commodity Futures Trading Commission Chairman Michael Selig called the law effectively a “sin tax” on blockchain technology in a July 1 op-ed.

Two industry lawsuits, now consolidated in Sangamon County circuit court, challenge the law: one led by The Digital Chamber and one from the Blockchain Association and Crypto Council for Innovation. The defendants are Illinois Revenue Director David Harris, Attorney General Kwame Raoul and Sangamon County State’s Attorney John Milhiser.

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On Nov. 11, the DeFi Education Fund and 17 other crypto organizations and companies asked the court for permission (leave) to file an amicus brief, where outsiders give a court their view. They include venture firm Andreessen Horowitz (a16z), Paradigm Operations LP and Uniswap Labs, which contributes to the development of the Uniswap Protocol. The plaintiffs don’t oppose the request. The DeFi Education Fund announced it Nov. 12. Unchained found no order granting it.

The proposed brief centers on decentralized finance (DeFi), trading and lending apps run by code on a blockchain, not a company holding customers’ money. The groups argue the Act’s definitions are vague and overbroad, and that developers of software people use to transact for themselves “have no customers to collect from, no assets to remit from, and no way to know where a transaction occurred.”

The groups point to the Revenue Department’s Sept. 28 draft rules, which they say stretch “broker” to certain decentralized exchanges, “directly contrary to the proscriptions of the Act and incorporated federal regulations.” The brief notes the federal rule excludes anyone “solely” validating transactions or providing non-custodial wallets, apps where users hold their own keys.

The brief argues the draft shows that vagueness at work: developers and providers “that lack custody of user assets” could face duties they cannot carry out. Reissuing the rules wouldn’t help, it adds, since the vagueness is “baked into the statute.”

The groups also argue the tax discriminates, because Illinois doesn’t tax the same activity with stocks, bonds or precious metals. They say that breaks the Illinois Constitution’s Uniformity Clause and the federal Internet Tax Freedom Act, and ask the court to find the Act “unlawful and unenforceable.”

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