Illinois enacts 0.2% crypto transaction tax

Illinois Gov. J.B. Pritzker signed 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 brokers to collect the charge from customers.

The law requires digital asset brokers doing business in Illinois to register with the Department of Revenue and list the 0.2% fee as a separate line item on customer statements. Accounting firm BDO has described the collection method as similar to a retail sales tax: the customer owes the amount to the platform, and the platform may pursue collection for unpaid bills. State revenue estimates project roughly $60 million in annual revenue from the tax.

Statutory language covers trades, storage and transfers. Industry representatives say the scope could include wallet-to-wallet movements and activity inside decentralized finance protocols. A transaction is considered to occur 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. Out-of-state companies that generate at least $100,000 in annual receipts from Illinois customers, measured each quarter, may also be subject to the tax.

Penalties for non-compliance include criminal charges. Brokers who fail to register and remit the tax may face Class 3 felony charges, which carry potential prison terms of two to five years and fines up to $25,000. Industry groups have said those penalties, combined with the broker-collection model, could lead firms to leave Illinois rather than comply.

Industry reactions were strong. Miles Jennings, general counsel at Andreessen Horowitz, wrote that “there is effectively no comparable state financial transaction tax on stocks, bonds, or derivatives anywhere in the country.” Coinbase CEO Brian Armstrong urged Gov. Pritzker to issue a line-item veto. The Crypto Council for Innovation requested a veto and warned the tax could harm consumers and startups; its CEO, Ji Kim, urged other states to avoid similar laws. Justin Slaughter, vice president of regulatory affairs at Paradigm, noted the provision was added late in the session with little debate or public hearings. Julian Berridi, a product manager at Ripple, warned that brokers taxed and penalized in this way could relocate to more permissive states.

Analysts and companies say the tax could prompt platforms to restrict access for Illinois users to avoid compliance risk. Calculating the fee on multi-step decentralized finance transactions may be complex for startups and service providers, increasing the chance that platforms block or exclude Illinois-based accounts.

The tax follows Illinois’ adoption of a separate regulatory framework for digital assets. Industry groups had urged lawmakers to delay state-level taxation until federal guidance was in place to avoid differing rules across states. Implementation details and potential legal challenges are expected as firms and regulators prepare for the law’s effective date in January 2027.