Illinois' 0.2% Crypto Tax Faces Brief From 18 Industry Groups

Eighteen crypto groups and companies, including Andreessen Horowitz (a16z), Uniswap Labs and Chainlink Labs, asked an Illinois court to let them argue that the state's 0.2% Digital Asset Tax Act is unlawful, the DeFi Education Fund said Thursday.

The law reaches a lot of people. The brief estimates 2.64 million Illinois residents hold digital assets, the fifth-highest count of any state.

How the tax works

Under the Act, a broker that exchanges, transfers or holds crypto for an Illinois customer must collect 0.2% of the asset's value each time, Unchained and Decrypt reported. On a $10,000 transfer, that's $20. The levy is on the full value, so it applies whether or not the customer made money.

The statute sets a Jan. 1, 2027 start. Illinois agreed in October to push that to July 1, 2027, The Block and Decrypt reported, though Unchained said it could not confirm a court approved the delay. None of the documents Black Mint reviewed estimate how much the tax would raise.

The DeFi argument

An amicus brief lets outsiders who aren't parties to a case give the court their view. This one, filed in Sangamon County, backs lawsuits from the Blockchain Association, the Crypto Council for Innovation, The Digital Chamber and the Illinois Blockchain Association.

The groups say the law's definitions are vague enough to cover decentralized finance, apps run by code rather than a company holding customer money. Developers of that software "have no customers to collect from, no assets to remit from, and no way to know where a transaction occurred," the brief says, as quoted by Unchained.

They also argue the tax singles out blockchain activity, since Illinois doesn't tax the same transfers of stocks, bonds or precious metals.

The plaintiffs don't oppose the filing, and Unchained found no order granting it. Neither Unchained nor The Block reported a response to the brief from Illinois officials.

In our opinion: this case turns on one word, "broker." Read narrowly, the tax lands on exchanges and custodians that can actually collect it. Read broadly, it reaches software makers who never touch a customer's coins, which is why a16z and Uniswap Labs signed on. Watch for the court's ruling on the brief and whether the July 1, 2027 date holds.