Illinois is set to become the first U.S. state to tax digital asset transactions, but the law faces a legal challenge and a legislative repeal attempt before it takes effect in 2027. The Digital Chamber filed a 32-page lawsuit on July 21 in Sangamon County Circuit Court, seeking to void the Digital Asset Tax Act and block its enforcement.
The 0.2% tax and its target
Signed into law earlier this year, the Digital Asset Tax Act imposes a 0.2% tax on digital asset transactions. It applies to intermediated trades — those handled by companies serving Illinois users — not peer-to-peer transfers. State budget projections estimate the tax will generate roughly $60 million in annual revenue.
The law is the first of its kind at the state level in the U.S. Its effective date of January 1, 2027 gives time for lawsuits, amendments, and agency guidance before implementation.
CFTC chair slams the law
Commodity Futures Trading Commission Chair Michael Selig publicly criticized the law on July 2, saying it “slammed the brakes on technological progress.” Selig’s comments came weeks before the lawsuit was filed, signaling federal concern over the state-level approach.
The Digital Chamber’s lawsuit argues the tax is unconstitutional and asks the court to block it. The group represents blockchain and crypto companies that would be affected by the levy.
Repeal bill already in the works
State lawmakers filed House Bill 5798 on June 22, 2026, aiming to repeal the Digital Asset Tax Act outright. The bill’s introduction predates the lawsuit, suggesting opposition was building even before the legal challenge.
It’s unclear whether the repeal effort has enough support to pass. The $60 million revenue projection gives budget writers a reason to keep the tax, while industry groups argue it will drive business out of Illinois.
The lawsuit and the repeal bill now run on parallel tracks. A court ruling could come before the legislature votes, or lawmakers could act first. Either way, the January 1, 2027 effective date means there’s still time — but not much — for the fight to play out.
