Illinois Lawsuit: Industry Fights New Digital Asset Levy

Illinois has introduced a new tax on cryptocurrencies and digital assets. This move has sparked a lawsuit from a major industry group. The tax aims to raise money for the state budget but faces strong legal pushback.

What Is the New Illinois Crypto Tax?

Governor JB Pritzker signed the law last month. It adds a 0.2 percent tax on crypto trades made through brokers. The tax starts on January 1 and is expected to bring in about 60 million dollars each year. It only applies to broker trades and skips private deals between people.

Brokers must sign up with the state revenue department. They collect the tax from Illinois users. Breaking the rules could lead to felony charges and up to five years in prison.

Why the Lawsuit Was Filed

The Chamber of Digital Commerce filed the case in Sangamon County court. This group represents over 250 companies in the digital asset space. They say the tax is unfair and breaks state and federal rules.

The main claim is that the law taxes the same kind of property just because it uses blockchain technology. The group argues that crypto is like stocks or cash but recorded in a new way. Past changes in technology never led to extra taxes like this.

They point out problems with the law. Definitions are unclear. There are no clear rules yet on how to count trades or find customer locations. One person might get taxed many times for moving assets between wallets without selling anything.

Key Arguments in the Case

The lawsuit says the tax hurts due process rights. It also claims it blocks fair trade across states. Brokers must prove their trades have no link to Illinois even when deals happen online with no clear location.

The group wants the court to stop the tax before it starts. They also ask for the state to pay their legal costs.

Other Taxes Facing Challenges

This crypto tax is not the only one under fire. A tax on sports prediction markets is being sued in federal court. A digital ad tax and a social media user tax are also part of the budget but may face similar fights.

The state budget does not count on money from these new taxes because legal issues were expected.

What This Means for Crypto Users and Companies

If the tax goes ahead it could make trading more costly for Illinois residents. Brokers might leave the state or raise fees. The case could set a rule for how other states tax blockchain assets in the future.

Technology keeps changing how money moves. The industry says taxes should focus on the asset not the tool used to track it. This lawsuit tests that idea in court.

Watch for updates as the case moves forward. The outcome could shape crypto rules across the country.