The crypto sector is expressing strong discontent over Illinois' newly implemented tax on digital asset transactions, which imposes a 0.2% levy on businesses dealing with cryptocurrencies. This tax, added to the state budget at the last minute, is not expected to be revised soon, according to two sources familiar with the situation.
The 0.2% tax on any business activity involving digital assets was added last-minute, and is unlikely to change, two people familiar with the matter said.
Governor J.B. Pritzker has signed off on a $56 billion state budget that includes this tax, which mandates that businesses involved in the exchange, storage, or transfer of digital assets for Illinois residents report this tax. The legislation defines digital asset business activity as any instance of exchanging, transferring, or storing digital assets as part of a business operation or on behalf of a customer.
This new tax applies to companies based in Illinois or those servicing in-state residents, provided their gross receipts reach at least $100,000. A source indicated that this tax could generate approximately $60 million in revenue.
The provision was hastily incorporated into Illinois' broader budget bill, which was approved by Governor Pritzker on June 16. This budget not only includes the new digital asset tax but also introduces taxes on fantasy sports and social media, as reported by ABC 7.
Moreover, the legislation may encompass a wider range of digital transactions, potentially affecting areas beyond cryptocurrencies, such as electronic bank transfers, as pointed out by Austin Campbell, an adjunct professor at NYU Stern School of Business.
It remains uncertain if this legislation can be altered in the near future. The Illinois Senate and House are currently out of session for the remainder of the year. There is a veto session scheduled for the fall, during which the governor might consider a line-item veto, a move that the Crypto Council for Innovation has requested in a letter dated June 16. However, it is unclear whether Pritzker will take such action. The tax is slated to come into effect on January 1, 2027.
The Crypto Council for Innovation criticized the tax in their correspondence to the governor, stating, "Unlike traditional tax frameworks that are tied to income, gains or profits, this law would impose a 0.2% tax on everyday customers' use of digital asset services such as exchange, transfer or custody activities." They contended that this approach unfairly targets cryptocurrencies while there is no equivalent state financial transaction tax on stocks, bonds, or derivatives anywhere else in the U.S.
One observer suggested that the most viable method for challenging or lessening the impact of the tax might be through legal action. Discussions regarding potential lawsuits are underway, but no filings have been made yet.
This tax comes on the heels of the crypto industry’s substantial support for Rep. Raja Krishnamoorthi, who received $10 million during Illinois' Democratic Senate primary, opposing Pritzker's favored candidate, Lieutenant Governor Juliana Stratton. Stratton won the primary and is expected to succeed Dick Durbin as Illinois' next senator.
The industry group Stand With Crypto, which is affiliated with Coinbase, assigned Stratton an "F" grade on digital assets, primarily based on a single post on X (formerly Twitter) where she remarked that "MAGA-backed crypto bros are dumping $7 million" into the primary race.
This tax legislation stands in stark contrast to previous Illinois initiatives, such as the Digital Assets and Consumer Protection Act. Miles Jennings, policy head and general counsel at Andreessen Horowitz Crypto, described that earlier bill as "a constructive approach to blockchain technology," while referring to the new tax as "one of the most anti-crypto laws in the U.S."