Illinois passes ‘most anti-crypto law in America,’ industry groups push back

Illinois just signed into law what crypto advocates are calling the harshest anti-crypto legislation passed by any U.S. state, a tax law that charges residents simply for transacting using digital assets, with no exemption even for transferring coins between their own wallets.

On Tuesday, Illinois Governor JB Pritzker signed Senate Bill 3019 into law, locking in a $55.9 billion budget for the next fiscal year. Crypto Industry groups are particularly discontented with Article 3 of the bill, known as the Digital Asset Privilege Tax Act. 

The Digital Asset Privilege Tax Act will charge a 0.2% tax on all digital asset business activity. According to the bill,” digital asset business activity” refers to all transactions conducted on a registered broker exchange. In essence, this means the taxman will tax all transfers and storage of digital assets on exchanges and brokers on behalf of all Illinois residents.

The bill will be effective from 1st January 2027, and some analysts project the trend may well spill over to neighboring states. Tax firm BDO USA notes that out-of-state platforms doing sufficient business with Illinois residents could be subject to the same rules.

Illinois digital asset blanket tax offers no exemptions

On June 16th, the Crypto Council for Innovation reportedly reached out with a letter to Governor Pritzker before he signed the bill to scrap Article 3 entirely. The council pointed out that Article 3 could be violating federal laws, as it categorically targets blockchain technology as a medium for asset transfer, favoring TradFi users. 

In the letter, the Crypto Council for Innovation painted the blanket bill as akin to taxing correspondence because it is delivered by email rather than by post. 

Prior to the governor assenting to the bill into law, the Blockchain Association and the Digital Chamber also sent a letter terming the proposal economically destructive, procedurally deficient, and unsound. The two groups argued that the Senate rushed this proposal into the budget with no public participation. The joint letter clearly states that no other state has enacted such a punitive tax law on its people. 

According to the proposal, any broker that operates in Illinois without registering and complying with the new rules can be charged with a class 3 felony. If found guilty, the parties can be fines upto $25,000 and serve two to five years’ imprisonment. 

Crypto community pushes back despite the signature

Industry experts have expressed their concerns over the Illinois bill. Miles Jennings, a general counsel at a16z, expressed displeasure, calling it the most anti-crypto law currently in the US. He pointed out there’s effectively no equivalent state transaction tax on stocks, bonds, or derivatives anywhere else, adding that crypto is being singled out in violation of several federal laws.

Analysts pointed out that Illinois is projected to collect over $800 million overall, with the crypto provision accounting for approximately $60 million yearly. The argument, therefore, is that the Senate rushed the bill into law as a measure to close the state’s budget gap without proper public participation. 

To add salt to injury, crypto firms are already adjusting to the federal Digital Assets and Consumer Protection Act, and Congress is separately working on its own national tax framework for the asset class. Layering a state-level transaction tax on top of that, critics argue, is exactly the kind of move that pushes builders toward Texas, Wyoming, or any other state that isn’t actively raising the cost of holding a wallet.

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