Key facts
- Illinois' 0.2% tax applies to digital assets exchanged, transferred or stored, even without a profit.
- The Justice Department said the tax undermines federal crypto innovation efforts, citing the Strategic Bitcoin Reserve and GENIUS Act.
- SIFMA and the US Chamber said the tax could expose banks, broker-dealers, custodians and asset managers to compliance costs.
- The DeFi coalition argued proposed rules could impose collection duties on software developers lacking customer information.
- Illinois projected the tax would generate $60 million in fiscal year 2027 revenue, per the governor's budget office.
The US Department of Justice, the US Chamber of Commerce, the Securities Industry and Financial Markets Association and a coalition of decentralized finance firms have backed a legal challenge to Illinois' 0.2% digital asset tax, according to a Thursday announcement from the Blockchain Association and Crypto Council for Innovation.
The Justice Department filed a statement of interest on November 6, saying the tax undermines federal efforts to promote cryptocurrency innovation and US leadership in the sector. The filing cited the creation of a Strategic Bitcoin Reserve and the GENIUS Act, which established federal rules for stablecoins, and argued that less favorable tax treatment for digital assets could conflict with those policies.
In a November 6 court filing, SIFMA and the US Chamber of Commerce warned that the tax would affect banks, broker-dealers, custodians and asset managers across the country, potentially exposing them to significant compliance costs. They said firms would need systems to identify Illinois customers, value digital assets and determine taxable transactions, while facing potential criminal penalties for violations. The groups argued the tax discriminates against digital asset services because comparable transactions involving traditional assets are not taxed the same way, potentially violating federal internet tax protections and constitutional requirements for interstate commerce and uniform taxation.
A coalition including venture capital firms Andreessen Horowitz and Paradigm as well as crypto protocols Uniswap and Aave Labs filed a brief on November 11. The group argued that Illinois' proposed rules could impose obligations on software developers and other blockchain participants who lack customer information, control over user funds or the ability to collect taxes.