Illinois crypto tax faces injunction bid before January start

A 0.2% tax on cryptocurrency transactions is set to take effect in Illinois in January 2027. The Crypto Council for Innovation and the Blockchain Association have filed a motion to block enforcement immediately. They seek a preliminary injunction in the Circuit Court of Sangamon County. The groups argue the levy will cause irreparable harm to digital asset firms. They contend the state is forcing companies to build costly compliance systems before legal questions are resolved. Cointelegraph reports that these firms face a January 1 deadline to allocate resources to what they deem an unlawful tax.

Ji Hun Kim, CEO of the Crypto Council for Innovation, stated that companies are being asked to spend millions to build systems for a tax that violates constitutional rights. He noted that basic questions about what is taxed and when remain unanswered. The groups argue this creates a situation where firms must divert key employees and resources. This happens under the threat of criminal penalties. They describe the current burden as a direct cost to businesses operating in the state.

Legal challenges cite constitutional violations

The two groups filed a lawsuit last month challenging the digital asset tax. They claim it violates the US Constitution and the state constitution. The suit also cites federal and state due process laws. Additionally, they argue the tax breaches the federal Internet Tax Freedom Act. Summer Mersinger, CEO of the Blockchain Association, said the state loses little by waiting. She warned that others lose greatly by forging ahead with the implementation.

Mersinger added that if the act stands, Illinois will not be the last state to try such a measure. The Digital Chamber also filed a similar suit days earlier. Illinois Governor JB Pritzker signed the measure into law in June. It was included in the state’s fiscal year 2027 budget. The law classifies the tax as a privilege tax applied to transaction volume rather than income.

First state to target crypto transactions

Illinois is the first state in the nation to single out crypto transactions for specific taxation. The law requires crypto users to be taxed based on transaction volume. This approach differs from standard income tax structures. The state aims to generate revenue from digital asset activity. The trade groups believe this specific targeting is legally unsound. They argue it creates an uneven regulatory landscape for the industry.

Separate lawsuit targets prediction market ban

Kalshi has filed a lawsuit against Illinois officials over a law banning sports event contracts. This law went into effect on July 1. The company claims the ban violates federal law by requiring state licensing. Separately, Governor Pritzker signed an executive order in April. This order bans state employees from betting on prediction market platforms. The administration cited the need to prevent insider trading amid the growth of online prediction markets.