The Illinois crypto tax faces a court challenge from two industry groups seeking to stop the measure before its Jan. 1, 2027, launch. They say the levy violates federal protections and is already creating costly compliance work across the crypto industry.
The Crypto Council for Innovation and Blockchain Association filed their motion on Wednesday in Sangamon County Circuit Court. They requested a preliminary injunction while the wider lawsuit moves forward.
The groups began their challenge last month alongside The Digital Chamber. Their latest motion focuses on costs facing member companies.
What Would the Illinois Crypto Tax Cover?
Illinois crypto tax imposes a 0.2% tax on covered crypto businesses. It applies to companies with their headquarters in Illinois and organizations operating in Illinois provided that gross income exceeds $100,000.
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The law was passed by the legislators during the last day of the 2026 legislative period. The law became a portion of a huge bill consisting of 1,624 pages covering various topics.
In addition, a 1.75% tax applies to sports bets on prediction market betting sites. This requirement is unrelated to the tax on cryptocurrency activities.
Why Are Crypto Groups Seeking an Injunction?
These organizations have alleged that the persons they represent will suffer severe and irremediable injury before the enactment of the law. Firms are mandated to design and implement the compliance system without being advised on the transactions involved.
According to CCI CEO, Ji Hun Kim, businesses may incur several million dollars in implementing the law. They also lack information on what Illinois will be taxing and when the liabilities will arise.
The lawsuit asserts that the Illinois crypto tax is in conflict with the Internet Tax Freedom Act of the United States government. The filing alleges that the aforementioned legislation safeguards internet-based commerce from discriminatory taxes.
Moreover, this legal challenge invokes the dormant Commerce Clause of the United States Constitution. This is because the tax is discriminatory in that it unfairly taxes interstate commerce.
According to the filing, Illinois generally imposes taxes on income, capital gain, and sales made with financial assets as consideration. Also, its sales and use tax provisions normally exempt intangible property, money, and precious metals.
How Did Illinois Pass the Digital Asset Law?
According to CCI and the Blockchain Association, the provision was pushed by the lawmakers in just a few hours. This is because, according to them, there has been insufficient debate from the legislators regarding the legality of the proposal.
The two organizations say that the General Assembly released the language of the legislation on the last day of the session. The motion says that such a tax would need more scrutiny.
What Happens Before the 2027 Start Date?
It will have to consider whether the enforcement needs to be stayed while the legal process takes place. The filing for the preliminary injunction does not settle the entire case against the legislation.
According to Summer Mersinger, who is the Blockchain Association CEO, Illinois cannot gain from the expected revenues while litigation continues. Mersinger further added that any delay will not impose much harm on the state.
Furthermore, according to Mersinger, even other states can follow Illinois’ suit, should Illinois win the legal battle. In this case, she has described the whole situation as more than just a legal fight in Illinois.
Kim described the whole measure as punitive and that the impact of the move on the industry cannot be rectified later. The Illinois crypto tax is still scheduled for 2027.
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