Illinois Crypto Tax Faces Industry Pushback
Eighteen parties, including Aave Labs and Chainlink Labs, call the 0.2% levy unclear and unworkable. The case also affects DeFi and non-custodial software in Illinois.
Key Takeaways
- Eighteen crypto companies and organizations are pushing back against Illinois’ 0.2% crypto tax, calling the levy too vague and unworkable.
- The state wants to tax companies with more than $100,000 in digital asset revenue; implementation has been delayed until July 1, 2027.
- The industry fears the law could also hit developers and DeFi players, while Illinois had expected as much as $60 million in revenue.
Illinois is facing strong pushback over its new crypto tax. Eighteen crypto companies and organizations, including Aave Labs, Chainlink Labs, Paradigm, Phantom Technologies, Stand With Crypto, and the DeFi Education Fund, have told the court that the levy is too vague and, in practice, impossible to enforce. The case centers on a 0.2% tax on crypto activity, which is currently on hold while the legal fight continues.
What Illinois Wants to Tax
The state wants to tax companies that have more than $100,000 (€90,200) in revenue from digital asset activities. According to the filings, this does not just cover traditional crypto exchanges, but also broader activity around transactions, transfers, and storage of digital assets. Illinois has also agreed to a six-month delay in the planned rollout, which is now set for July 1, 2027.
The industry says the law is too unclear about who exactly should count as a crypto broker. Developers and providers of non-custodial software, in particular, could get caught up in it, they say, because they have no customer relationship, no access to customer funds, and often cannot even determine where a transaction takes place. The brief says the state would therefore be pulling in parties that simply cannot collect or administer the tax.
Why the Industry Is Objecting
The core of the pushback is that, according to the signers, the tax does not fit how crypto works. In an amicus brief, where involved parties can explain their position to the judge, they warn that the law could affect developers who write software that lets others make transactions on their own. In their view, that would amount to a broad and unworkable interpretation of the term digital asset business activity.
The objections are especially sensitive because the rule also touches DeFi. Earlier, among others, a16z and Uniswap Labs had already warned that the law’s broad scope could effectively amount to a ban on DeFi activities in Illinois. For European crypto readers, this matters because it shows how quickly states in the U.S. are trying to tax crypto transactions, while the industry points to the technical limits of enforcement. Pressure on crypto companies is also growing elsewhere in the U.S.: in Hong Kong, crypto exchanges will have to report tax data starting in 2027, meaning providers will soon have to collect customer and transaction data for tax purposes.
Political Pressure in Illinois
The new tax was approved under Governor JB Pritzker, who recently won reelection with more than 60% of the vote. The state had previously expected revenue of up to $60 million (€54.1 million) for the budget, but so far the pushback has mostly come from the industry, with no visible counterweight of the same size. The outcome of the lawsuit could therefore matter for other U.S. states that are looking at similar levies.