Illinois’ New Crypto Tax Has the Industry Worried

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Illinois has become the focus of a growing crypto policy dispute after Governor J.B. Pritzker signed the Digital Asset Privilege Tax Act into law. The measure introduces a new tax on certain digital asset transactions, and has prompted industry groups to argue that Illinois is now treating cryptocurrencies differently from every other major financial asset. Critics say the law could discourage innovation and push blockchain companies to relocate as federal lawmakers work toward a nationwide crypto tax framework.

Crypto Industry Says Illinois Is Singling Out Digital Assets

In an X post on June 17, Andreessen Horowitz crypto executive Miles Jennings described the legislation as “one of the most anti-crypto laws in the U.S.,” and argued that it imposes a 0.2% tax on the exchange, transfer, or custody of digital assets whereas comparable transactions involving stocks, bonds, and derivatives remain untaxed.

According to Jennings, the law effectively penalizes blockchain-based transactions because of the technology used and not the underlying financial activity.

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He also argued that the approach creates inconsistent tax treatment, comparing it to taxing an email and leaving the same message untaxed if it were sent through traditional mail.

The criticism follows a June 16 letter from the Crypto Council for Innovation (CCI), which urged Governor Pritzker to issue a line-item veto before signing the legislation. The organization warned that Illinois would become the only U.S. state with a transaction-based tax specifically targeting digital assets.

CCI Warns of Competitive and Legal Risks

In its three-page letter, the Crypto Council for Innovation argued that the Digital Asset Privilege Tax Act creates a unique tax regime that could discourage digital asset investment, reduce Illinois’ competitiveness, and burden ordinary users carrying out routine crypto transactions.

The organization also contended that the proposal conflicts with established tax policy because it taxes transactions based on whether they occur on a blockchain rather than on the nature of the underlying asset. According to CCI, no comparable state financial transaction tax exists for stocks, bonds, or derivatives.

The letter further criticized how the legislation advanced, and said that affected stakeholders weren’t given sufficient opportunity to participate before the proposal moved forward. 

CCI also urged Illinois to delay state-level action until Congress finalizes a national framework for digital asset taxation, and warned that differing state rules could create a fragmented regulatory landscape.

Following the bill’s signing, CCI called it “the most punitive digital asset tax in the country,” whereas Jennings argued that policies targeting blockchain activity risk driving developers, entrepreneurs, investment, and innovation outside Illinois.