Illinois signs 0.2% crypto "privilege tax" into $55.9B budget; industry calls it a chain-letter fine 📬

Illinois Governor JB Pritzker signed a $55.9 billion state budget on Tuesday that includes a 0.2% "privilege tax" on crypto transactions involving state residents, advancing the measure over objections from major digital asset industry groups. The provision, contained in Article 3 of Senate Bill 3019, applies to digital asset transactions on any registered platform under the broader category of "digital asset business activity."

The Crypto Council for Innovation (CCI) urged Pritzker to issue a line-item veto of the article, warning the tax would "create an unprecedented tax regime that disproportionately burdens Illinois residents for simply using digital assets and will drive innovation and builders out of the state." The Digital Chamber sent a similar letter opposing the Digital Asset Privilege Tax Act on June 3, arguing the levy "will discourage the use of digital assets at the very time when financial services are moving to the blockchain, freezing Illinois residents out of progress and innovation and pushing the existing IL blockchain and crypto companies out of the state."

According to tax firm BDO USA, the measure could also affect out-of-state companies that maintain sufficient customer activity in Illinois. The CCI noted the bill would make Illinois the only state to tax digital asset users regardless of income, gains, or profits, departing from traditional tax structures, and added that digital asset brokers operating in the state must register and comply with new reporting obligations.

Miles Jennings, head of policy and general counsel for a16z Crypto, wrote on X on Wednesday that the law was among the most anti-crypto measures in the United States, stating, "There is effectively no comparable state financial transaction tax on stocks, bonds or derivatives anywhere in the country. That means crypto is being singled out in violation of several federal laws." He added that "rather than embracing innovation and the cost efficiencies blockchains can deliver for ordinary people in Illinois, the state is poised to punish its entrepreneurs and citizens that want to use crypto."

The CCI compared the transaction-based levy to taxing the medium of an exchange rather than its value, writing that "taxing a transaction based on the medium through which it happens to occur on a blockchain is akin to taxing correspondence because it is delivered by email rather than by post." Illinois is home to several crypto firms, including Zero Hash, Jump Crypto, Bitnomial, and Apex Crypto. The industry also pointed to concurrent federal work on the Digital Assets and Consumer Protection Act (DACPA) and a separate Congressional effort to craft a national tax framework for digital assets, both of which they said complicate the state's unilateral approach.