Crypto Trade Groups Sue Illinois to Block 0.2% Digital Asset Transaction Tax

Two leading crypto advocacy organizations have filed suit to stop Illinois' planned 0.2% tax on digital asset transactions, arguing the measure is unconstitutional and unlawfully targets crypto activity. The Crypto Council for Innovation (CCI) and the Blockchain Association submitted their complaint on Friday, August 21, in Sangamon County Court, CoinDesk reported. The filing adds to a separate lawsuit brought last month by The Digital Chamber, a trade group representing blockchain businesses. The two cases signal a coordinated industry effort to derail the tax before it takes effect. Illinois enacted the 0.2% levy earlier this year as part of its state budget legislation, making it the first U.S. state to adopt such a tax on digital asset transactions. The measure is aimed at generating revenue from the expanding cryptocurrency sector. It applies to companies based in Illinois or serving customers in the state that report at least $100,000 in gross revenue. The tax is scheduled to begin in 2027. Industry groups say the policy singles out digital assets for treatment not applied to traditional financial transactions and could ultimately raise costs for everyday users if companies pass the tax through. In the new complaint, the plaintiffs contend the tax violates the U.S. Constitution, the Illinois Constitution, and the federal Internet Tax Freedom Act, which prohibits discriminatory taxes on electronic commerce. CCI CEO Ji Kim said the levy imposes a uniquely punitive burden on digital assets based on the underlying technology rather than the substance of the transaction, and argued that taxing only digital asset activity while exempting traditional financial transactions amounts to the state 'picking winners and losers' through the tax code. The case remains at an early stage and the court has not ruled. A decision favoring the plaintiffs could invalidate the tax and shape how other states approach digital asset taxation. Legal observers note the constitutional issues could eventually move to higher courts, though there is no certainty the litigation will progress beyond the trial level. In the meantime, crypto firms operating in Illinois face ongoing uncertainty as the lawsuits proceed. For additional background, readers can consult BlockchainReporter's practical guide to blockchain interoperability and its guide to the Crypto Travel Rule.