Illinois becomes first state to tax crypto transactions this way

Illinois Governor JB Pritzker has signed a $55.9 billion state budget that includes a new tax on digital asset transactions, despite objections from crypto industry groups.

The measure creates a 0.2% tax tied to digital asset business activity in Illinois. It applies to activity carried out by digital asset brokers, including exchange, transfer, custody, and wallet services.

Illinois adds crypto tax to budget

The new law makes Illinois one of the first states to add a broad transaction-level tax aimed at digital assets. BDO USA said the Digital Asset Tax Act starts on Jan. 1, 2027, and requires brokers to register with the Illinois Department of Revenue before covered activity begins.

The tax is part of a wider fiscal 2027 budget plan. Earlier state budget documents estimated about $60 million in revenue from the crypto tax. The measure moved through the budget process after lawmakers approved Senate Bill 3019.

In addition, the Crypto Council for Innovation asked Pritzker to issue a line-item veto for Article 3 before he signed the budget. The group said the tax would “drive innovation and builders out of the state.”

The group also argued that the levy targets digital assets because they use blockchain rails. It compared the logic to “taxing correspondence because it is delivered by email rather than by post.” The Digital Chamber and the Illinois Blockchain Association also opposed the measure, saying lawmakers gave the industry “zero advance notice.”

Remote firms may fall under rule

The law does not only apply to firms based in Illinois. BDO said out-of-state digital asset brokers can fall under the rule if they have at least $100,000 in annual receipts from Illinois customers.

The sourcing rules are broad. A transaction can count as Illinois activity when customer location, account records, mailing address, IP address, or other data points show Illinois as the place of primary use.

Brokers must register and report

Brokers must collect the tax from customers as a separate line item. BDO said customers legally owe the tax to the provider, while brokers must keep records and file monthly reports covering the prior month’s activity.

The rule also adds registration duties before Jan. 1, 2027. Registration lasts one year and renews automatically unless the broker cancels it or the state revokes it. Miles Jennings, head of policy and general counsel for a16z Crypto, said there is “no comparable state financial transaction tax” on stocks, bonds, or derivatives in the United States.

Federal tax debate adds context

As previously reported by crypto.news, Illinois lawmakers approved the 0.2% crypto transaction tax and new broker registration rules before the budget reached Pritzker’s desk. That earlier version also included criminal penalties for unregistered brokers after the start date.

The signed budget shifts the issue from a pending proposal to a compliance deadline. Brokers with Illinois users now need to review user records, activity types, billing systems, and registration steps before the tax starts.

As crypto.news reported earlier, House lawmakers are reviewing federal crypto tax proposals covering stablecoin payments, staking rewards, mining income, DeFi lending, wash-sale rules, charitable donations, and taxpayer disclosure programs.

The Illinois law stands apart from those federal proposals because it taxes covered digital asset activity rather than income, gains, or profit. Industry groups say that design treats crypto differently from traditional financial assets, while the state has now moved the rule into law.