Illinois Becomes First State to Tax the Act of Using Crypto: 0.2% on Every Move 🧾

Illinois Governor J.B. Pritzker signed a $55.9 billion state budget on Tuesday that includes a 0.2% "Digital Asset Privilege Tax" on digital asset transactions, making the state the first in the U.S. to tax digital asset users regardless of income, gains or profits. The tax, part of Senate Bill 3019, takes effect January 1, 2027, and applies to activity physically conducted in the state as well as activity by individuals with a "place of primary use" in Illinois, according to the bill text. Digital asset brokers, including major crypto exchanges, will be required to register, collect the tax, and comply with new reporting obligations. The Illinois Policy Institute said lawmakers expect the measure to generate as much as $60 million next year.

The Crypto Council for Innovation (CCI) urged Pritzker to issue a line-item veto of Article 3, calling the measure the "most punitive digital asset tax" in the country. "This will 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 CCI wrote in a letter to the governor. The group added that "no other state in the country has adopted a similar transaction-based tax, meaning Illinois would be an outlier in an increasingly competitive landscape for digital asset innovation." The CCI also argued the tax singles out digital assets based on the medium of exchange, writing: "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." The Digital Chamber sent a similar letter opposing the Digital Asset Privilege Tax Act on June 3.

Industry executives sharply criticized the law. Miles Jennings, head of policy and general counsel for a16z Crypto, said on X on Wednesday that it was "one of the most anti-crypto laws in the U.S.," adding: "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." Jennings also said: "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." Marc Andreessen, co-founder of a16z, said the tax proposal was "concerning." Coinbase CEO Brian Armstrong also reinforced his opposition. Illinois is home to crypto companies including Zero Hash, Jump Crypto, Bitnomial, and Apex Crypto, and BDO USA noted the tax could also impact out-of-state companies with sufficient customer activity in the state. The CCI's letter also objected to the legislative process, stating that "a first-of-its-kind tax targeting an entire industry and the Illinois residents who use its products and services calls for meaningful stakeholder engagement before enactment."

The tax comes as Congress weighs its own approach to digital asset taxation. The House Ways and Means Committee recently reviewed seven crypto tax proposals, including measures covering mining, staking, and a potential de minimis exemption, though the hearing revealed a lack of bipartisan consensus. The CCI noted the industry is also adjusting to the federal Digital Assets and Consumer Protection Act (DACPA), and said the timing of Illinois's tax is poor because lawmakers are separately working on a national crypto tax framework. CCI's letter also flagged potential double taxation issues for $BTC mining and staking, while industry groups continue to push for harmonized federal rules, even as progress is expected to slow ahead of the November midterm elections.