Yesterday, Illinois Governor JB Pritzker enacted Senate Bill 3019, positioning Illinois as the first state in the nation to implement a transaction-based tax on cryptocurrency. This decision quickly faced backlash from cryptocurrency industry advocates, who had urged him to reconsider before finalizing the law.
Known as the Digital Asset Privilege Tax Act, this provision was included in a comprehensive 1,624-page revenue bill that constitutes part of Illinois’ $55.9 billion budget for the fiscal year 2027 budget. The act imposes a 0.2% fee on the value of any digital asset involved in transactions, transfers, custodial services, or wallet management for an Illinois customer.
Effective January 1, 2027, this tax is anticipated to raise approximately $60 million per year, a small portion of the broader budget’s expected total of over $800 million in new revenue.
A Disincentive for Crypto
Unlike traditional capital gains or income taxes, Illinois’ new tax applies at the point of transaction, irrespective of whether the individual profits from it. No similar state-level financial transaction tax exists for stocks, bonds, or derivatives across the United States.
The Crypto Council for Innovation (CCI), an international coalition of industry professionals, characterized the new tax as “the most punitive digital asset tax in the nation” and cautioned that it would likely create “a significant chilling effect on digital asset activities within Illinois.”
Miles Jennings, Policy Head and General Counsel at a16z Crypto, further articulated his concerns, drawing an analogy between the tax and charging extra fees for receiving an email compared to traditional mail — targeting the technology behind the transaction instead of its actual content.
CCI’s correspondence to Pritzker echoed this sentiment, noting that an investor holding a stock, bond, or derivative on paper does not incur a similar tax, while executing a transaction involving the same instrument on a blockchain instantly triggers this new levy.
The responsibility for collecting this tax falls on digital asset brokers, which include exchanges, custodians, wallet service providers, and companies transferring assets between accounts.
Brokers situated outside of Illinois will be subject to this law once their annual transactions with Illinois customers exceed $100,000. They must register with the Illinois Department of Revenue by January 1, 2027, submit monthly tax reports, and itemize the tax separately on customer invoices.
Neglecting to register will not be taken lightly—unregistered brokers risk facing Class 3 felony charges, which carry potential prison sentences ranging from two to five years and fines up to $25,000.
Chicago hosts major crypto and trading firms such as Bitnomial—the first U.S. leveraged retail spot crypto exchange—and Jump Crypto. Industry representatives are concerned that this taxation may drive these firms to relocate to states with more favorable regulations, potentially draining Illinois of the investment and talent that has thrived there.
CCI stated that the timing of this law is particularly unfortunate, as digital asset businesses are currently facing challenges related to the implementation of Illinois’ own Digital Assets and Consumer Protection Act.
The crypto tax is not the only element of SB 3019 that could provoke legal disputes; there has also been significant pushback over related social media and digital advertising taxes contained within the same bill, raising issues of federal preemption and First Amendment rights.