The Digital Chamber Sues Illinois Over First State Crypto Tax — Here Is What the Lawsuit Is Fighting to Block

The Digital Chamber, one of the crypto industry’s largest trade associations, filed a lawsuit in Sangamon County on Tuesday seeking to block Illinois from enforcing what would become the first state-level tax on digital asset transactions in the United States. 

The lawsuit targets the Digital Asset Tax Act, a 0.2% levy on the value of digital assets involved in covered transactions that Governor JB Pritzker signed into law on June 16 as part of the state’s annual budget bill. The tax is set to take effect January 1, 2027, and Illinois projects it will generate approximately $60 million in additional tax revenue.

The Digital Chamber Says the Tax Goes Too Far 

The Digital Chamber’s lawsuit argues the tax is discriminatory and constitutionally flawed on its face. Its core argument is that no person should be taxed differently based solely on how their ownership is recorded or transferred — and that a tax applied specifically to digital asset transactions does exactly that. 

🧵1/ Today we filed suit in Sangamon County, IL, to stop the Digital Asset Tax Act. No one should be taxed differently because of how ownership of digital assets is recorded or transferred. pic.twitter.com/pv3J3FPybM

— The Digital Chamber (@DigitalChamber) July 21, 2026

The organization also flagged a structural problem with how the crypto tax is designed: it applies to the full value of assets involved in a covered transaction regardless of whether the investor realizes any gain, and regardless of whether ownership is actually changing hands. 

In its broadest application, the Digital Chamber said, the provision could extend to any technology transaction beyond crypto — potentially reaching artificial intelligence (AI) and cloud-based applications.

CEO Cody Carbone said the lawsuit was necessary because the tax was never given the deliberative consideration that tax legislation typically receives. “The provision slipped into legislation the night before the bill’s final consideration,” he said. 

“Taxes should be carefully considered, not only for the revenue they produce but for the fairness of those being taxed. That was not the case here.” The association said its members are already incurring compliance costs ahead of the January 2027 effective date — costs the lawsuit seeks to stop from compounding further while the legal challenge plays out.

A Repeal Bill, and a Veto Option 

The Digital Chamber is not the only crypto industry voice pushing back. Jump Crypto and Bitnomial have both raised concerns about the new tax, adding institutional weight to what is shaping up as a coordinated industry response to Illinois’s move. 

The law’s opponents argue that beyond the tax itself, the legal and policy uncertainty it creates makes Illinois a more difficult environment for digital asset businesses — a form of regulatory friction that could push companies and investment to other states.

Forbes reported that Illinois lawmakers are already moving to address that uncertainty from within. House Bill 5798 was introduced on June 22 — six days after the governor signed the tax into law — seeking to repeal the provision. 

Governor Pritzker also retains the option to use a line-item veto to remove the provision from the budget, though he has not indicated any intention to do so. 

If neither the repeal bill nor a veto succeeds, the Illinois Department of Revenue will need to issue implementing regulations before January 2027 to fill gaps in the crypto tax law’s current language.

Featured image generated with OpenArt.