18 Crypto Firms Tell Illinois Court Its 0.2% Digital Asset Tax Is Unenforceable

Amicus Brief Targets the 0.2% Levy

Eighteen crypto businesses and organizations asked an Illinois court on Thursday to strike down the state's pending 0.2% tax on digital asset transactions, filing an amicus brief that calls the levy discriminatory, unconstitutionally vague and, as written, practically impossible to enforce. Illinois moved to tax assets changing hands in crypto transactions in June, catching much of the industry off guard. The measure would impose a 0.2% tax on crypto activity involving firms with more than $100,000 in receipts, and the state has since agreed to a six-month delay from the originally planned Jan. 1 implementation while the litigation runs its course.

The filing was signed by Aave Labs, Chainlink Labs, Paradigm, Phantom Technologies, Stand With Crypto and the DeFi Education Fund, among others, with Andreessen Horowitz and Uniswap also part of the opposition. Its core argument is that Illinois' definition of “digital asset business activity” cannot be pinned down in a system built on decentralized finance protocols, where software, not an intermediary, moves the assets. According to the brief, the Illinois Department of Revenue would be “sweeping in developers, providers and other network participants who would not be able to collect a tax from customers they do not have, direct payments from assets they do not control or determine a transaction's location from information they do not have.” Under the state's reading, obligations would fall on people who write software that others use to transact for themselves. Those developers have no traditional customers, no reach into or knowledge of users' assets and never hold a private key. Unlike a traditional broker or market maker responsible for carrying out transfers on another's behalf, providers of non-custodial software keep no accounts or customer records and have no technological ability to collect or store them. The signatories conclude the statute discriminates against the digital assets industry, since no comparable levy touches any other asset class in the state.

@fund_defi · X post

According to the brief.

View on X

DOJ and Wall Street Join the Challenge

The 18-firm brief sits within a wider wave of filings this month backing a lawsuit brought by the Crypto Council for Innovation and the Blockchain Association, which are asking a judge to strike down the Digital Asset Tax Act and permanently block its enforcement. The law imposes a 0.2% levy on the full value of a digital asset each time an Illinois customer moves it through a broker, covering spot trading, transfers and storage alike, even when there is no sale, gain or change of ownership. Critics call it among the most punitive crypto taxes in the country: Illinois imposes no comparable tax on dollars, gold or stocks, and no other state has anything like it.

On Nov. 6, the U.S. Justice Department filed a statement of interest arguing the tax is vague and discriminatory, singling out crypto for treatment no other asset faces and undermining federal policy and U.S. leadership in digital assets. The U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association, which represents hundreds of broker-dealers, banks and asset managers, filed their own amicus brief warning that the levy reaches beyond crypto-native platforms to the traditional banks, custodians and advisers now offering digital asset products.

A separate brief filed on Nov. 11 brought together the DeFi Education Fund, Andreessen Horowitz, Paradigm and Uniswap with Aave Labs, Chainlink Labs, Solana Policy Institute, Phantom, Jito Labs, Multicoin Capital and Stand With Crypto. Their filing notes an estimated 2.64 million Illinoisans hold digital assets, the fifth-highest total of any state, and argues the law's definitions could stretch to software developers and decentralized protocols that hold no customer funds and cannot identify users or locate transactions. “This tax is unclear, discriminatory, unconstitutional, and harmful to the future of finance,” Crypto Council for Innovation CEO Ji Hun Kim and Blockchain Association executive Ashok Pinto said in a joint statement. The challenge dates to August, and Illinois agreed in October to pause the tax until July 1, 2027.

The breadth of the opposition, a federal Justice Department filing standing alongside Wall Street's main lobbies and crypto's largest venture firms, moves the dispute beyond a crypto-versus-regulator fight into a broader question of whether a state can tax asset transfers that produce no gain. Illinois' own concession of a pause until July 1, 2027 already pushed the Jan. 1 start off the table, and the state must now defend definitions that, per the briefs, would ask custodian-less developers to collect money they cannot reach. Hearings are likely to turn on whether the statute can function at all against non-custodial software; if the court accepts that it cannot, the 0.2% levy is unlikely to survive in its current form.