Illinois has added a new tax on digital asset businesses in its latest budget. Under the law, companies providing digital asset exchange, transfer, or custody services to residents of the state will be subject to a 0.2% tax on these activities. The budget has been signed by Governor J.B. Pritzker, and the tax will take effect on January 1, 2027.
The tax scope covers exchanges, transfers, and custody.
The law defines "digital asset business activity" as a single transaction involving the exchange, transfer, or storage of digital assets conducted by a business in the course of its operations or on behalf of its customers. Under this definition, any business that is based in Illinois or provides related services to Illinois residents with total gross revenue of at least $100,000 is required to file this tax.
Individuals following the legislative process said the provision was added at the final stage of the budget and is unlikely to be adjusted in the short term. Those tracking the bill estimate that this tax could generate approximately $60 million in annual revenue.
Industry organizations say the provisions are too narrowly targeted.
The crypto industry has expressed opposition to this measure. In a letter to the governor on June 16, the industry organization Crypto Council for Innovation stated that this tax does not target income, profits, or capital gains, but rather directly taxes users' everyday use of digital asset services, including transactions, transfers, and custody.
The organization believes that the U.S. currently has no comparable state-level financial transaction tax that specifically targets the exchange, transfer, or custody of stocks, bonds, or derivatives, making this arrangement effectively single out cryptocurrency businesses for special treatment.
Limited room for modification; litigation may be the next step.
It is currently unclear whether this legislation can be amended soon. The Illinois General Assembly’s regular session for this year has concluded; although a veto session is scheduled for the fall, during which the governor could consider line-item vetoes, it remains uncertain whether he will do so.
According to insiders, the more realistic path forward may be litigation. Several related institutions have been discussing potential lawsuits, but no cases have been formally filed as of yet.
Additional information: Austin Campbell, an adjunct professor at New York University’s Stern School of Business, believes the bill’s wording is broad and could theoretically extend beyond crypto assets to encompass broader electronic fund transfers. Illinois previously enacted the Digital Assets and Consumer Protection Act, which contrasts with this new tax provision.