Justice Department and Wall Street lobby back challenge to Illinois' 0.2% crypto tax

The US Justice Department, the US Chamber of Commerce and the Securities Industry and Financial Markets Association (SIFMA) have filed court papers backing a challenge to Illinois' 0.2% tax on digital asset transactions, as Decrypt and Cointelegraph reported. The tax is set out in the plaintiffs' brief in a state court in Sangamon County.

One tax on value, whether or not anyone gains

The Digital Asset Tax Act imposes a tax "upon the privilege of receiving any digital asset business activity by a customer in this State at the rate of 0.2% of the value of the digital asset to which the digital asset business activity relates," the Blockchain Association and the Crypto Council for Innovation quote the statute as saying in their brief. They argue that the tax applies each time a customer exchanges, transfers or stores an asset through a broker, "even if the customer buys nothing, sells nothing, gains nothing, and transfers no ownership."

Brokers must collect and remit the tax, and the brief says that any broker who violates any provision of the Act "is guilty of a Class 3 felony." The plaintiffs also say the Act's definition of transfer includes moving an asset between two accounts of the same customer.

Three filings in six days

According to Decrypt, the Justice Department filed a statement of interest on Friday, November 6, arguing that the tax undermines federal policy and US leadership in digital assets and singles out crypto for treatment no other asset faces. Cointelegraph reported that the filing cited the Strategic Bitcoin Reserve and the GENIUS Act, the federal stablecoin law, and argued that less favorable tax treatment could conflict with those policies.

The Chamber of Commerce and SIFMA, which Decrypt describes as representing hundreds of broker-dealers, banks and asset managers, filed an amicus brief the same day. Cointelegraph quoted it as saying: "This means that a customer who loses money owes the same tax as a customer who earns a profit." The groups warned that the tax would reach banks, custodians and asset managers, not only crypto-native platforms.

A third brief followed on Wednesday, November 11, led by the DeFi Education Fund, Andreessen Horowitz, Paradigm and Uniswap, Decrypt reported. It argues that the Act's definitions are vague enough to stretch to software developers and decentralized protocols that hold no customer funds and cannot identify users.

What the brief says about timing and process

The plaintiffs' brief says the Act was passed on the last day of the 2026 session, as 20 pages of a 1,624-page bill, and that the Governor signed it on June 16. It asks the court for a preliminary injunction on four grounds, among them the federal Internet Tax Freedom Act and the dormant Commerce Clause, which limits state laws that burden interstate commerce.

The brief gives the start date as January 1, 2027. Decrypt reported on October 1 that Illinois officials agreed with the plaintiffs in a separate case, brought by The Digital Chamber, to ask the court to move the start to July 1, 2027, and Decrypt said in its November report that Illinois had paused the tax until then. Cointelegraph said Illinois lawmakers and the governor's office did not respond to its requests for comment.

A tax test case that reaches well beyond Illinois

We think the coalition matters more than any single argument in it. When the federal government, the largest bank lobby and the crypto industry's biggest venture investors all object to the same state tax, the case becomes a test of whether a state can tax the value of digital assets in a way it taxes no other asset.

The threat for Illinois is that a court strikes the tax on federal grounds and leaves the state without a revenue source it counted on. The opportunity, for the industry and for other states, is a clearer rule: if the court narrows the tax to realized transactions or to fee income, the compliance burden becomes knowable. We would watch whether the court rules on the Internet Tax Freedom Act question first, because a ruling there would decide the case without reaching the vaguer questions. Our view would change if Illinois publishes final rules that settle who must collect. We do not forecast prices, and nothing here is a view on any token.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.