Crypto advocacy groups oppose Illinois digital asset tax in court

Following a similar lawsuit filed by the Digital Chamber in July, two digital asset advocacy groups challenged Illinois’ 0.2% crypto tax on constitutional and due process grounds.

The Crypto Council for Innovation (CCI) and Blockchain Association (BA) filed a lawsuit against Illinois officials regarding the state’s 0.2% tax on cryptocurrency, expected to be enforced starting in January 2027.

In a lawsuit filed Friday in the Circuit Court of the Seventh Judicial Circuit for Sangamon County, lawyers for the two crypto advocacy groups challenged Illinois’ digital asset tax on the grounds it violated the US Constitution, the state’s constitution, federal and state due process laws and the federal Internet Tax Freedom Act. Illinois Governor JB Pritzker signed the measure into law as a “privilege tax” in June as part of the state’s fiscal year 2027 budget, requiring crypto users to be taxed as applied to transaction volume rather than income.

On the due process claim, CCI and BA argued that the tax was “unconstitutionally vague” by placing the burden on residents and brokers “under the threat of serious civil and criminal penalties” to determine what and how such assets were taxed. Notably, the crypto organizations’ arguments under the US Constitution were based on alleged violations of the Commerce Clause covering interstate commerce, claiming that the state tax “creat[ed] the specter of duplicative taxation.”

“States have an important role to play in fostering innovation, but that authority has constitutional limits,” said Summer Mersinger, CEO of the Blockchain Association and a former commissioner at the US Commodity Futures Trading Commission. “Illinois cannot impose a novel tax regime that discriminates against digital commerce, creates uncertainty for consumers and businesses, and threatens to fragment a rapidly growing national market.”

Source: Blockchain Association

The CCI and BA lawsuit followed a similar one filed by the Digital Chamber in July in which that organization argued that the Illinois tax “discriminates against people who transact in digital assets.“ The suits represented the influence of digital asset groups in opposition to laws passed by US state officials during an election year when crypto policy, laws and regulation could influence voters.

Related: Nigeria sets crypto tax collection rules for digital asset platforms

Illinois also targeting prediction markets

Opposition to the crypto tax came amid prediction market platform Kalshi’s lawsuit against Illinois officials over a law that went into effect on July 1. According to the company, the legislation “expressly bans sports event contracts” in violation of federal law by requiring state licensing.

Separately, Pritzker signed an executive order banning state employees from betting on the platforms in April in an effort to ”prevent insider trading amid the rapid growth of online prediction markets and event-based gambling contracts.”

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