The Digital Currency Council (TDC), a crypto industry lobby group, filed a lawsuit against Illinois this week over a new 0.2% tax on digital asset transactions. The tax was enacted by the state legislature last month and is scheduled to take effect next year. TDC is asking a federal court to block the law before it goes live.
The lawsuit
TDC filed the complaint in the U.S. District Court for the Northern District of Illinois. The group argues the tax violates the Commerce Clause of the U.S. Constitution by burdening interstate digital transactions, and also runs afoul of the Dormant Commerce Clause because it taxes activity that occurs largely outside Illinois. The suit names the Illinois Department of Revenue and its director as defendants.
The 0.2% tax applies to any digital asset transaction where either the buyer or seller is in Illinois. That includes trades on centralized exchanges, decentralized platforms, and peer-to-peer transfers. TDC says the tax is effectively a levy on the entire U.S. crypto market because Illinois is a major hub for digital asset activity.
What the tax does
Illinois lawmakers passed the tax as part of a broader budget package last month. It imposes a 0.2% fee on the gross value of each digital asset transaction, with the state estimating it will generate roughly $60 million annually once it takes effect next year. The law requires exchanges and other intermediaries to collect and remit the tax.
TDC argues the tax is preempted by federal law and that Illinois is overstepping its authority. The group also claims the tax is impractical to implement because tracking the location of every party in a crypto transaction is often impossible, especially on decentralized platforms.
Industry reaction
No official statements from TDC or Illinois officials are available in the court filings beyond the legal arguments. The case is likely to draw attention from other states considering similar taxes. At least a half-dozen other state legislatures have floated crypto transaction taxes this year, though none have passed one as broad as Illinois's.
The timing isn't great for Illinois. The state is already facing a lawsuit from a separate trade group over its digital asset licensing regime. TDC's case adds another legal headache for the state's crypto policy.
The court has not yet set a hearing date. TDC is seeking a preliminary injunction to stop the tax from taking effect while the case proceeds. If the injunction is granted, the tax won't go live next year until the court rules on the merits. If it's denied, exchanges operating in Illinois will have to start preparing to collect the 0.2% fee.
The case is Digital Currency Council v. Illinois Department of Revenue, No. 26-cv-XXXX in the Northern District of Illinois.
