Market Pulse: Illinois’ 0.2% Crypto Tax Sparks a Full-Blown Courtroom War

In the current cycle, two heavyweight crypto trade groups have dragged Illinois into court over a first-in-the-nation 0.2% tax that could hammer digital asset trades, transfers, and storage when it kicks in Jan.

The Blockchain Association and Crypto Council for Innovation filed the complaint on Aug.

21 in Sangamon County Circuit Court against Illinois Department of Revenue Director David Harris, Attorney General Kwame Raoul, and Sangamon County State’s Attorney John Milhiser.

They want the Digital Asset Tax Act declared unlawful and preliminary and permanent injunctions blocking enforcement.

The battle starts with how Illinois calculates the levy.

Rather than taxing a customer’s profit, the law grabs 0.2% of the digital asset’s value when certain activities run through a digital asset broker.

The complaint says the tax can hit even when a customer “buys nothing, sells nothing, gains nothing, and transfers no ownership.” That means swapping bitcoin, shifting it between accounts or paying a company to custody it could trigger tax.

The complaint says Illinois previously treated digital assets much like other financial property for tax purposes, with income or capital gains potentially taxable, while the transaction or custody service generally stayed untouched.