Illinois enacts 0.2% tax on crypto transactions

Illinois Gov. J.B. Pritzker approved a $55.9 billion state budget that includes the Digital Asset Tax Act, a 0.2% privilege tax on the exchange, transfer and custody of digital assets. The tax takes effect Jan. 1, 2027, and requires digital asset brokers operating in Illinois to collect the fee from customers. Conventional securities such as stocks, bonds and derivatives are not subject to a comparable state transaction tax.

The provision is embedded in Senate Bill 3019 and requires brokers to register with the Illinois Department of Revenue and show the 0.2% charge as a separate line item on customer bills. Illinois projects about $60 million in annual revenue from the levy. Under the law the customer is legally responsible for the tax and platforms may pursue unpaid amounts as delinquent bills.

BDO, an accounting firm, described the tax as similar to a retail sales tax. The state’s sourcing rules apply broadly: an out-of-state company that generates at least $100,000 in Illinois receipts in a quarter can be subject to the tax. A transaction may be treated as occurring in Illinois if the customer is physically present in the state or if auxiliary data such as a mailing address, account information or an IP address indicates Illinois as the primary place of use.

Brokers that fail to register or remit the tax face criminal penalties. The statute exposes noncompliant firms to Class 3 felony charges with potential prison terms of two to five years and fines up to $25,000.

Industry officials criticized the law for creating a distinct tax category for digital assets. Miles Jennings, general counsel at Andreessen Horowitz, described the measure as “one of the most hostile and anti‑crypto laws in the country” and wrote that “there is effectively no comparable state financial transaction tax on stocks, bonds, or derivatives anywhere in the country.” Coinbase CEO Brian Armstrong and other executives objected to the provision.

Justin Slaughter, vice president of regulatory affairs at Paradigm, noted the tax was introduced in the final hours before sine die, passed with limited debate and without public hearings, and warned lawmakers lacked a full understanding of how blockchain businesses operate. The Crypto Council for Innovation requested a line‑item veto and warned the levy could harm consumers and startups. Ji Kim, the council’s CEO, urged other states to view Illinois as a cautionary example. Julian Berridi, a product manager at Ripple, predicted companies and jobs could relocate to states with more favorable rules.

The law covers trading as well as holding and transfers, which industry groups say could complicate tax calculations for decentralized finance protocols. Those groups warned that compliance costs and legal exposure could lead some platforms and custodial services to restrict access for Illinois residents, a practice known as geoblocking.

Illinois lawmakers framed the tax as a revenue source while the state contends with long-term budget shortfalls driven by pension obligations and a shrinking tax base. Industry groups urged delay until Congress completes a national tax framework for digital assets to avoid conflicting state rules.