Illinois posts draft rules for its 0.2% crypto transaction tax

Illinois published draft rules on September 28 for a 0.2% tax on crypto transactions, the clearest sign yet of how the levy will work when it starts on January 1, 2027. Brokers, not customers, will collect it.

The Illinois Department of Revenue released the draft and opened public comment through October 30, according to a notice on its website. The rules come from the Digital Asset Tax Act, part of Public Act 104-0468, which Governor JB Pritzker approved in June.

It arrives during a busy stretch for US crypto policy, days after federal regulators cleared Coinbase to run its own clearinghouse.

What Illinois wants to tax

Stablecoins are in. Even the ones built to hold a fixed value count as taxable digital assets under the draft. Nonfungible tokens are out. Illinois left them aside because its legal definition covers assets whose worth comes only from existing on a chain.

Decentralized finance mostly escapes, with one catch. A swap is taxed only when a platform collects a protocol fee, which the rules treat as valuable consideration. Network fees paid to miners or validators do not count. Neither do swap fees that go straight to liquidity providers. Cross-chain bridge activity is covered when it runs through a broker for a fee, and even a transfer between wallets can be taxed if an exchange charges for it.

Per trade, the math is small. Move $10,000 of covered assets and the tax comes to $20. It applies whether the trade made money or lost it, which is part of why the industry is unhappy. Out-of-state brokers fall under the rules once they take in $100,000 in gross receipts from Illinois customers.

Who pays and how it is collected

Customers will not file anything. Under the draft, the broker, meaning a centralized exchange, custodian or payment processor, adds the tax and sends it to the state. Most people would see it as a line item on a buy, a sale, a transfer or a storage fee.

A step remains. The department has not filed the draft with the Illinois Secretary of State or sent it to the Joint Committee on Administrative Rules, the panel that clears state regulations. So the language can still change before it is final. Comment closes October 30.

Crypto groups are fighting it in court

Two trade groups want the tax stopped before it takes effect. The Blockchain Association and the Crypto Council for Innovation filed a motion for a preliminary injunction on September 9 in the Circuit Court of Sangamon County. They had already sued the state in August. Their case is one of several recent US crypto rules now being tested.

Summer Mersinger, chief executive of the Blockchain Association, said Illinois "has enacted a first-in-the-nation tax that unfairly singles out digital commerce, fragments a national market, and exposes companies and ordinary Illinoisans to severe penalties." She said the law could even bring felony liability for companies.

Ji Hun Kim, chief executive of the Crypto Council for Innovation, said the compliance cost was already biting. Companies "are being asked to spend millions to build systems for a tax that violates their Constitutional rights," he said, with no clear answers on what is taxed and when. The groups argue the law breaks the Illinois Constitution and the federal Internet Tax Freedom Act by taxing digital commerce that similar traditional finance avoids. They also point to the projected haul, about $60 million, against more than $224 billion in state spending.

Neither side has won yet. No judge has ruled on the injunction, and the state has kept the January 1 start date in place. Illinois has not said publicly whether it will change the draft in response to the suit.

What to watch

Comment is the next real marker. Brokers, exchanges and DeFi teams have until October 30 to push back on the wording, and the department can revise it before filing with JCAR. A court date on the injunction is the second thing to track. If a judge blocks the tax, the January 1 launch slips. If not, Illinois becomes the first US state to charge a flat fee on crypto transfers, and other states short on cash will watch what follows.