Illinois Agrees to Delay Rollout of 0.2% State Crypto Tax

What happened

Illinois officials and two crypto industry groups jointly asked a state court to delay the rollout of the state's new crypto asset tax by six months, three months before it was set to take effect.

In an agreed motion filed Oct. 1 in Sangamon County Circuit Court, the Chamber of Digital Commerce, the Illinois Blockchain Association, Illinois Department of Revenue Director David Harris and Attorney General Kwame Raoul asked the court to move the tax's effective date from Jan. 1, 2027 to July 1, 2027.

The parties said the delay would preserve the status quo and allow time for briefing and a decision on the legal issues without prejudicing either side. The proposed injunction would remain in effect until July 1 unless the court changes it. The agreement does not resolve the lawsuit, and both sides keep their claims and defenses.

The Digital Asset Tax Act, signed into law in July by Illinois Governor JB Pritzker, would tax digital assets in qualifying transactions for Illinois customers at a rate of 0.2%.

Why it matters

The delay keeps the 0.2% levy from taking effect while the constitutional challenge moves forward. The industry groups argue the law violates several provisions of the Illinois Constitution, the U.S. Constitution's Commerce Clause and the Fourteenth Amendment Due Process Clause, and that the federal Internet Tax Freedom Act preempts it. State officials dispute those claims.

The Digital Chamber filed suit in July, and the Crypto Council for Innovation and Blockchain Association followed in September with their own lawsuit. Those groups argued the law would force them and their members to spend millions of dollars to comply on an expedited basis.

The case also turns on who counts as a broker. The broker definition would cover centralized exchanges, some decentralized finance platforms that collect protocol fees, custodians, broker-dealers and digital payment processors, while retailers that accept crypto as payment would be exempt from being treated as brokers.

What the data shows

• The tax rate is 0.2%.
• The agreed motion would move the effective date from Jan. 1, 2027 to July 1, 2027.
• The Digital Chamber filed suit in July, and the Crypto Council for Innovation and Blockchain Association followed in September.
• The Crypto Council for Innovation and Blockchain Association argued compliance could cost it and its members millions of dollars.

Background

• Governor JB Pritzker signed the Digital Asset Tax Act in July.
• A U.S. House panel advanced a crypto tax bill last month, and Senate Republicans introduced a tax bill for the crypto industry earlier this week.
• The CLARITY Act, which would provide a market structure for crypto, faces a setback, and all Democrats voted against it during the cloture vote last month.

What is still unclear

• The court has not decided the constitutional claims, and state officials dispute them.
• Industry advocates warn the law is unclear and that residents could be hit with the same tax multiple times on the same transaction.

Questions readers ask