Crypto Lobbying Groups Take Illinois Tax Fight to Court

The Crypto Council for Innovation and Blockchain Association have asked an Illinois court to prevent a new state cryptocurrency tax from taking effect while their lawsuit challenging the measure moves forward.

The groups filed a motion for a preliminary injunction Wednesday in Sangamon County Circuit Court, several weeks after launching their legal challenge. They argue that enforcing the tax would cause substantial and potentially irreversible damage to businesses in the crypto industry.

The two organizations, together with The Digital Chamber, previously sued over Illinois’ Digital Asset Tax Law. Their central argument is that federal law preempts the state legislation. Approved on the final day of Illinois’ legislative session, the law imposes a 0.2% tax on qualifying digital asset-related gross receipts earned by companies based in the state or providing services there.

The tax applies to entities with gross receipts exceeding $100,000 and is scheduled to take effect Jan. 1, 2027.

In their latest filing, the groups said member companies are already investing significant amounts in compliance systems ahead of the law’s implementation. They described these expenses as “serious and irreparable harm.”

CCI CEO Ji Hun Kim said companies could be forced to spend millions of dollars preparing for a tax that the organization believes violates constitutional protections. He also criticized the uncertainty surrounding which digital asset activities will be taxed and when the tax would become applicable.

Blockchain Association CEO Summer Mersinger said delaying the law would have little downside for Illinois because the state would not be able to spend the projected tax revenue while the lawsuit is pending. Businesses, however, could face major costs if they are required to continue preparing for the measure.

The latest court filing reinforces the industry’s argument that the Internet Tax Freedom Act and the U.S. Constitution prevent Illinois from imposing the tax on digital asset transactions.

The organizations also contend that the law unfairly distinguishes digital assets from traditional financial services. They point out that Illinois generally does not impose sales taxes on transactions or services involving financial assets, instead taxing income and capital gains generated through those activities. The state’s sales and use tax rules also generally exclude intangible personal property and specifically exempt money and precious metals.

The legal dispute could extend beyond Illinois if other states consider adopting similar crypto taxes. Mersinger warned that a successful defense of the Illinois law could encourage additional states to pursue comparable measures.

The preliminary-injunction request is the latest attempt by the crypto industry to stop the tax before its scheduled launch, leaving the courts to determine whether Illinois has the authority to impose the levy.