Illinois just became the testing ground for a question no other state has dared to answer: can you single out crypto businesses with a dedicated tax and expect the courts to go along with it?
Two separate lawsuits are now challenging the state’s Digital Asset Tax Act, a 0.2% levy on digital asset business activities that Governor JB Pritzker signed into law on June 16, 2026. The Blockchain Association and the Crypto Council for Innovation filed their suit on August 21, while the Digital Chamber launched its own challenge in late July. Both cases landed in Sangamon County Circuit Court, and the plaintiffs aren’t just asking for a review. They want the whole thing stopped before it takes effect on January 1, 2027.
What the tax actually does
The Digital Asset Tax Act targets a specific slice of the financial ecosystem. It applies a 0.2% tax on digital asset business activities, which covers transactions, transfers, and custody services provided by brokers.
The threshold for getting caught in its net: more than $100,000 in gross receipts connected to Illinois from digital asset activities.
Illinois is the first state to impose this kind of targeted tax on crypto business operations.
The compliance burden is where the math gets ugly. Industry representatives project that meeting the tax’s requirements could cost firms tens or hundreds of thousands of dollars, with some estimates exceeding $1 million per firm.
The constitutional arguments
The lawsuits aren’t built on the premise that taxes are bad. They’re built on the premise that this particular tax is unconstitutional in several specific ways.
First up: the Commerce Clause. The plaintiffs argue that taxing digital asset activities specifically, while leaving equivalent traditional financial activities untaxed, discriminates against a particular type of interstate commerce.
Then there’s Due Process. The tax reaches any entity with more than $100,000 in gross receipts “connected to Illinois,” a phrase that could sweep in firms with minimal physical presence in the state.
The third prong involves the Internet Tax Freedom Act, a federal law that prohibits discriminatory taxes on electronic commerce. If digital asset transactions qualify as electronic commerce, then a tax that singles them out while sparing analogous non-digital transactions could run afoul of federal law.
A preliminary injunction was requested on September 9, 2026, asking the court to block enforcement before the January 1 effective date. That timeline matters. If the court doesn’t act before year-end, firms will face a choice between expensive compliance and the risk of criminal penalties for non-compliance.
How the law got passed
The Digital Asset Tax Act was passed during the final hours of the Illinois legislative session as part of the fiscal year 2027 budget package. The plaintiffs are arguing this process crossed a line: limited debate accompanied a bill that creates an entirely new category of state taxation.