Illinois enacts 0.2% digital asset tax in FY2027 budget plan

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Illinois 0.2% digital asset tax

Highlights

Illinois enacts a 0.2% tax on digital asset transactions and services as part of its FY2027 budget, targeting exchanges, custodians, and wallet service providers.
The law applies to digital asset businesses with a physical Illinois presence or over $100,000 in receipts from Illinois customers, but excludes peer-to-peer transfers and direct wallet transactions.
Crypto industry leaders, including the Crypto Council for Innovation and Andreessen Horowitz, warn the tax could drive innovation out of Illinois and say it imposes unprecedented, sector-specific burdens not seen in traditional finance.

Tax structure and implementation timeline

The Block reported that the Digital Asset Tax Act becomes law after Pritzker signs it as part of Illinois' FY2027 budget planning, creating a 0.2% charge on the value of digital asset transactions or services provided to customers in the state.

The measure mainly targets service providers such as exchanges, custodians and brokers, which must collect and remit the tax in a structure that resembles sales tax administration. The law covers exchanges, custodians, platforms, wallet services and other businesses with either a physical presence in Illinois or more than $100,000 in annual gross receipts from Illinois customers.

While the law is not intended to tax peer-to-peer transfers such as direct wallet-to-wallet transactions or onchain activity that bypasses centralized intermediaries, industry groups say the text leaves key operational questions unresolved. The Illinois Digital Chamber says it is unclear how the tax will work in practice, warning that transfers between wallets, conversions between digital assets or custodial storage could face a 0.2% charge on full asset value even when no gain is realized or when a user incurs a loss.

Industry backlash and wider policy implications

Crypto industry organizations, including the Crypto Council for Innovation, the Digital Chamber and the Illinois Blockchain Association, are opposing the law and arguing that it imposes a disproportionate burden on digital asset users and businesses. The Crypto Council for Innovation says the measure creates an unprecedented tax regime that could push innovation and builders out of Illinois.

Andreessen Horowitz Head of Policy & General Counsel Miles Jennings calls the measure one of the most anti-crypto laws in the U.S., arguing that it taxes the exchange, transfer or storage of digital assets in ways not seen in other financial markets. He says there is effectively no comparable state financial transaction tax on stocks, bonds or derivatives anywhere in the country and adds that crypto appears to be singled out in violation of several federal laws.

The new law also marks a sharper turn from Illinois' earlier digital asset legislation. In 2025, Pritzker signs the Digital Assets and Consumer Protection Act and the Digital Asset Kiosk Act, which the Digital Chamber says reflected industry input and compromise, but the group now argues the new tax shows discriminatory treatment toward the sector and a policymaking approach that risks driving innovators out of the state.

Our earlier report on the IRS Electronic Tax Administration Advisory Committee’s 2026 annual report outlined 18 recommendations to strengthen digital tax administration and taxpayer service. It highlighted calls for predictable IRS funding, continued technology modernization, tax simplification, fraud prevention, and clearer oversight of tax preparers—signaling growing pressure on U.S. tax systems to upgrade infrastructure as policy and enforcement demands expand.

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