DOJ, Banks, DeFi Unite Against Illinois Crypto Tax

Broad Coalition Challenges Illinois Digital Asset Tax

An unusually broad coalition, encompassing the U.S. Justice Department, major Wall Street lobbying groups, the national Chamber of Commerce, and a host of cryptocurrency firms, has lent its support to a legal challenge against Illinois’ pioneering tax on digital asset transactions.

This month, these organizations filed legal briefs in Illinois state court backing a lawsuit brought by the Crypto Council for Innovation and the Blockchain Association. The plaintiffs are urging a judge to invalidate the state’s Digital Asset Tax Act and permanently halt its implementation.

The tax imposes a 0.2% levy on the full value of a digital asset each time an Illinois customer trades, transfers, or stores it through a broker. This applies even when no sale, gain, or change in ownership occurs. Critics have decried it as one of the most punitive crypto taxes in the nation, particularly because Illinois does not impose a comparable tax on dollars, gold, stocks, or any other asset, and no other state has enacted a similar measure.

On November 6, the Justice Department submitted a statement of interest, arguing that the tax undermines federal policy and U.S. leadership in the digital asset space. The department characterized the tax as vague and discriminatory for singling out cryptocurrency for a treatment not applied to any other asset.

The U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association, which represents hundreds of broker-dealers, banks, and asset managers, filed an amicus brief warning that the tax extends far beyond crypto-native platforms to include traditional banks, custodians, and advisors who are increasingly offering digital asset products.

A separate brief, filed on November 11, united prominent figures in the crypto industry, led by the DeFi Education Fund, Andreessen Horowitz, Paradigm, and Uniswap. This filing also included Aave Labs, Chainlink Labs, Solana Policy Institute, Phantom, Jito Labs, Multicoin Capital, and Stand With Crypto.

Their submission contends that the law’s definitions are so ambiguous they could encompass software developers and decentralized protocols that do not hold customer funds, lack the ability to identify users, or are unaware of where a transaction took place. The brief highlighted that an estimated 2.64 million Illinois residents hold digital assets, the fifth-highest total among all states.

“This tax is unclear, discriminatory, unconstitutional, and harmful to the future of finance,” stated CCI CEO Ji Hun Kim and Blockchain Association executive Ashok Pinto in a joint statement.

The legal challenge originated in August. As previously reported, Illinois agreed in October to pause the tax until July 1, 2027, providing time for the ongoing court proceedings.