Crypto Groups Launch Legal Challenge Against Illinois Digital Asset Tax

The lawsuit, filed August 21 in the Seventh Judicial Circuit Court, names Revenue Director David Harris, Attorney General Kwame Raoul, and State’s Attorney John Milhiser as defendants. Industry groups argue the tax constitutes discriminatory internet taxation, specifically citing the federal Internet Tax Freedom Act. They contend the statute treats digital assets differently than stocks or gold, while creating compliance uncertainty due to vague definitions regarding business presence and asset valuation.

The legislation, enacted under Public Act 104-468, applies to the value of assets involved in exchanges or transfers rather than transaction profits. This structure means even simple wallet-to-wallet transfers could trigger tax liability. Plaintiffs further allege the tax violates the Commerce Clause and the Illinois Constitution’s Uniformity Clause, while challenging the legislative process used to include the measure within a massive 1,624-page budget package.

This marks the second industry challenge to the tax, following a July filing by the Digital Chamber. While Representative John Cabello has introduced House Bill 5798 to repeal the act, the proposal remains stagnant in the legislature. With no court-ordered injunction yet in place, firms are currently required to prepare for the January deadline. The state projects the tax could generate $60 million annually, though this figure remains subject to the outcome of these ongoing legal proceedings.