The Blockchain Association and Crypto Council for Innovation filed a lawsuit seeking to bar the State of Illinois from enforcing the Digital Asset Tax Act before it takes effect on Jan. 1, 2027.
The Digital Asset Tax Act would levy a 0.2 percent tax on the value of a digital asset that is either exchanged, stored or transferred by customers in the state. The tax would be borne by customers and collected by digital asset brokers in Illinois.
The Blockchain Association and Crypto Council first jointly challenged the state tax in August. This new motion asks the court to stop the state from collecting this tax before it goes into effect.
The organizations say that digital asset companies are already being forced to spend millions of dollars to develop systems to try to comply with the act on an expedited basis, without meaningful guidance on core questions, under the threat of criminal penalties for noncompliance.
Further, the organizations say that businesses are also likely to lose customers once the act goes into effect as customers shift to assets not subject to any similar tax.
“llinois has enacted a first-in-the-nation tax that unfairly singles out digital commerce, fragments a national market, and exposes companies and ordinary Illinoisans to severe penalties – including felony liability for companies – for guessing wrong about an indeterminate statute. It projects roughly $60 million in revenue from this tax against more than $224 billion in appropriations, and under the Protest Monies Act the State likely could not spend those funds during this litigation anyway. The State loses very little by waiting. Everyone else loses a great deal by forging ahead. And if this Act stands, Illinois will not be the last state to try it,” Summer Mersinger, CEO of the Blockchain Association, said.
To two organizations are asking the court to grant a preliminary injunction to stop the law from taking effect.
“Companies are being asked to spend millions to build systems for a tax that violates their Constitutional rights without answers to basic questions about what is taxed and when, all under the threat of criminal penalties. These costs are being borne right now, against a January 1 deadline, forcing companies to divert key resources and employees to a clearly unlawful tax. Businesses are also losing customers who will move away from digital asset activities and allocate capital to assets Illinois does not tax. A ruling that arrives after the tax takes effect does not undo these harms. We are therefore asking the court to preserve the status quo rather than let an unlawful tax operate first and sort it out later,” Ji Hun Kim, CEO of the Crypto Council for Innovation, said.
The motion for a preliminary injunction was filed in the Circuit Court of Sangamon County, Illinois.