Key Highlights
- The Crypto Council for Innovation and Blockchain Association filed a motion seeking to block Illinois’ Digital Asset Tax Act.
- The law imposes a 0.2% tax on certain digital assets exchanged, transferred, or held through brokers.
- The groups argue the tax could apply multiple times to the same transaction and raises four separate legal challenges.
The Crypto Council for Innovation (CCI) and the Blockchain Association have asked an Illinois court to temporarily block the state’s new digital asset tax before it takes effect.
The groups filed a motion for a preliminary injunction on September 9 in the Circuit Court of Sangamon County, seeking to pause enforcement while their broader legal challenge proceeds.
The motion follows a lawsuit filed by the two groups in August challenging the law on federal and state grounds. The tax is currently scheduled to take effect on January 1, 2027.
Illinois tax applies to digital asset activity
The Digital Asset Tax Act, enacted as part of Public Act 104-0468, imposes a 0.2% tax based on the value of certain digital assets exchanged, transferred, or held through a broker.
Unlike a capital gains tax, the levy is not based on whether an investor makes a profit.
The law requires digital asset brokers to register with the Illinois Department of Revenue, while certain remote brokers face a $100,000 Illinois-receipts threshold for tax-collection obligations. The law also provides for Class 3 felony penalties for certain violations, including failures to file returns or maintain required records.
In their 34-page brief, the plaintiffs argue that the tax can become disproportionate because it is based on the full value of digital assets rather than the fee charged by a broker.
The brief says a broker charging $1 to move $1 million in digital assets could face about $2,000 in tax on that transaction.
The filing also argues that a single transaction could potentially be taxed up to three times if an exchange, transfer and storage are treated as separate taxable activities.
CCI CEO Ji Hun Kim said:
“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.”
The statement reflects CCI’s position in the litigation and is not a court finding.
Groups seek injunction before tax takes effect
The plaintiffs argue that allowing the law to take effect could force affected businesses to incur compliance costs before the court resolves their legal claims.
They also argue that some of those costs could be difficult to recover later because of sovereign immunity protections. This forms part of their argument for obtaining an injunction before January 1.
Blockchain Association CEO Summer Mersinger said:
“The State loses very little by waiting. Everyone else loses a great deal by forging ahead.”
The court has not yet ruled on the request.
Plaintiffs raise four legal challenges
The 34-page brief presents four main legal challenges to the tax.
First, the groups argue that the measure is preempted by the federal Internet Tax Freedom Act (ITFA). They contend that Illinois is taxing digital transactions while leaving economically comparable transactions involving assets such as stocks, bonds, gold or cash outside the same framework.
Second, they argue that the tax violates the dormant Commerce Clause because transactions involving multiple states could potentially result in double taxation. The plaintiffs say the law does not provide a clear credit for taxes paid to another state.
Third, the groups argue that the law is unconstitutionally vague, citing uncertainty over which businesses must register, which entities must collect the tax and how Illinois determines whether a customer or transaction is connected to the state.
Fourth, they raise claims under the Illinois Constitution, including an argument that the tax was enacted as part of a large omnibus bill that violates the state’s single-subject rule.
These are allegations made in the plaintiffs’ filing and have not been decided by the court.
Tax was added to large legislative package
The plaintiffs also challenge the process through which the measure was enacted.
According to their brief, Senate Bill 3019 was originally introduced in January 2026 as a two-page proposal concerning loans for agricultural property.
On the final day of the legislative session, amendments replaced the bill’s original contents with a 1,624-page package covering multiple subjects, including gambling, vehicle regulations and the Digital Asset Tax Act.
The plaintiffs say lawmakers had roughly one hour of notice before committee hearings and floor votes on the revised legislation, with both chambers approving the package within about 24 hours.
Governor JB Pritzker signed the bill on June 16.
The legislative process forms part of the plaintiffs’ argument that the measure violates constitutional requirements governing legislation in Illinois.
Eugene Scalia joins legal team
The court filing also lists Eugene Scalia, who served as U.S. Secretary of Labor from 2019 to 2021, among the plaintiffs’ attorneys.
Scalia is part of the Gibson, Dunn & Crutcher legal team representing the groups, alongside local counsel from Springfield-based Craven & Craven.
His involvement is identified in the court filing and is separate from the trade groups’ public announcement of the preliminary injunction motion.
Digital Chamber filed separate lawsuit
The latest filing follows a separate lawsuit brought by the Digital Chamber on July 21 in the same Sangamon County court.
The Digital Chamber argues that Illinois’ tax framework treats digital assets differently based on the technology used to record ownership.
The two lawsuits are now pending before the same court. Neither case has produced a final ruling on the tax.
CFTC Chair previously criticized the tax
CFTC Chair Michael Selig also criticized the Illinois tax before the lawsuits were filed.
In a July 1 op-ed, Selig argued that the levy could discourage blockchain investment and weaken Chicago’s position as a financial center.
Selig also questioned a tax that applies to digital asset transactions regardless of whether they generate a profit.
His comments preceded the current injunction proceedings and were separate from the lawsuits filed by the Digital Chamber, CCI and the Blockchain Association.
Maryland ruling provides legal context
The Illinois plaintiffs have also pointed to a recent Maryland decision involving a different type of digital tax.
On August 14, a Maryland tax court struck down the state’s Digital Advertising Gross Revenues Tax, which applied to online advertising revenue.
The court found the tax violated the Internet Tax Freedom Act and dormant Commerce Clause, according to the Illinois plaintiffs’ brief.
The Maryland case did not involve a digital asset tax, and the two laws are different. The Illinois plaintiffs nevertheless argue that the Maryland reasoning supports their position that states cannot impose different tax treatment on certain digital activity while leaving economically comparable offline activity outside the tax.
The Illinois court will make its own determination based on the state’s law and the arguments presented in the case.
State response remains unclear
The Illinois Department of Revenue and the Illinois Attorney General’s Office, which are named as defendants, had not publicly responded to the September 9 motion as of publication.
Illinois has projected that the tax could generate approximately $60 million annually once it takes effect.
A separate measure, House Bill 5798, would repeal the digital asset tax, but the bill has not advanced beyond being filed.
What happens next
Illinois’ digital asset tax remains scheduled to take effect on January 1, 2027.
The immediate question is whether the court will grant the preliminary injunction and pause enforcement while the broader case proceeds.
The underlying lawsuits will determine whether the tax can ultimately remain in place. For now, the court has not ruled on the groups’ challenge or their request to halt enforcement.
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