The Digital Chamber filed a federal lawsuit Tuesday challenging Illinois’s newly enacted Digital Asset Tax Act, which imposes a 0.2% tax on digital asset transactions.
TDC, a crypto lobbying organization, argues the tax violates multiple constitutional provisions and federal law. The lawsuit was filed the same day Illinois wrapped its legislative session after inserting the tax provision into the state budget last month.
The tax applies to any entities based in Illinois or providing digital asset services in the state with gross receipts exceeding $100,000. It is scheduled to take effect in January 2027.
Constitutional and Federal Claims
TDC alleges the tax violates the Illinois state constitution’s uniformity and due process clauses, the Commerce Clause of the U.S. Constitution, and the Internet Tax Freedom Act.
The organization contends the tax discriminates based on technology type rather than economic substance. According to the lawsuit filing, “The Act does not distinguish between gains and losses, between profitable and unprofitable transactions, between realized and unrealized appreciation, or between transfers that change ownership and transfers that do not. It distinguishes only between traditional financial infrastructure and blockchain infrastructure.”
TDC argues federal law distinguishes between what an asset represents and the infrastructure used to record it, but Illinois’s tax distinguishes only by technology type. The lawsuit cites the Internet Tax Freedom Act, which states that “electronic commerce would not be subjected to discriminatory state and local taxation.”
Timing and Implementation
Illinois passed the Digital Asset Tax Act on short notice before concluding its legislative session last month. The provision was inserted into the state budget during the final stretch of the session.
The tax will apply starting in January 2027 to any entity meeting the $100,000 gross receipts threshold. TDC’s lawsuit seeks to block Illinois from enforcing the measure before it takes effect.
