Illinois Draft Targets Crypto Transactions With 0.2% Tax

Illinois has enacted a 0.2% tax on digital assets handled in covered transactions, but the rules explaining how it applies to stablecoins, DeFi and ordinary wallet transfers remain in draft.

The Digital Asset Tax Act takes effect statewide on January 1, 2027. For an Illinois customer, the levy applies to the value of covered assets, not to the broker’s fee. The draft says a covered transaction involving $10,000 in digital assets would produce a $20 tax, regardless of whether the customer made a profit or loss.

Governor JB Pritzker approved the act on June 16 as part of Public Act 104-468. But the Illinois Department of Revenue has not yet filed its proposed rules with the Secretary of State or submitted them to the Joint Committee on Administrative Rules. They remain open for public comment through October 30, according to a department statement reported on September 28.

That distinction matters. The tax is enacted, while the treatment of stablecoins, DeFi platforms and several other transactions is still proposed.

What changes for a stablecoin holder

The draft would treat stablecoins as digital assets subject to the tax, even when they are designed to maintain a fixed value against dollars, commodities or other financial instruments.

Illinois officials say the statutory exclusion for certain non-investment digital representations does not cover an asset marketed to hold an effectively fixed value. NFTs would receive a different treatment. The draft places NFTs outside the tax because the state definition excludes digital representations with value or utility beyond simply existing as digital assets, including art, collectibles and intellectual property.

Tokenized securities and tokenized commodities also appear among the proposed statutory exclusions.

The sources reviewed did not name individual stablecoin issuers. Nor did the reporting establish which protocols would be affected in practice, because the draft document itself was not read.

DeFi fees could bring a platform into scope

The proposed rules would generally exempt DeFi transactions because users do not provide valuable consideration to a digital asset broker. The important exception is the fee paid to the platform itself.

Protocol fees collected for operating or maintaining a DeFi service are classified as valuable consideration. The associated exchange, transfer or storage activity could therefore be taxable.

The draft also draws a distinction between platforms. A decentralized exchange that collects protocol fees can qualify as a digital asset broker. A peer-to-peer platform whose swap fees go only to liquidity pools would not meet that definition, according to the proposal.

The treatment of miners and validators is clearer. Network fees paid directly for blockchain processing are not valuable consideration under the draft. Swap fees paid solely to liquidity providers are also excluded.

Gas stays outside the tax calculation

Gas fees would not be included in the calculation of the 0.2% levy. The draft treats them as direct payments for blockchain processing sent to miners or validators, rather than fees collected by an exchange or digital asset service provider.

That does not make every DeFi transaction tax-free. A platform fee charged to operate or maintain the service can still bring the related activity within the tax. The difference is who receives the payment and what it pays for.

The draft also includes cross-chain bridges in its definition of exchange activity. The 0.2% tax can apply to the value of the assets when a broker provides bridge services for consideration.

Wallet transfers depend on who handles them

An Illinois resident transferring assets from an exchange-controlled wallet to a personally managed wallet would face the tax if the centralized exchange charges a fee for the transfer. The exchange is treated as a broker providing transfer services for valuable consideration.

A transfer between two accounts belonging to the same customer may also be taxable if a broker charges a fee and the movement creates an entry on the blockchain. The ownership does not have to change.

A direct transfer between personally controlled wallets would not be taxable under the draft if there is no broker or other paid intermediary. Internal book transfers by a bank also would not create a taxable event when nothing moves on the blockchain.

Paying a merchant from an exchange-managed wallet can be taxable if the exchange charges a transfer fee. Under the draft, the retailer does not become a digital asset broker merely by accepting crypto as payment.

The 0.2% levy is not a capital gains tax

Illinois is taxing covered business activity, not the customer’s investment return. A profitable trade and a losing trade can therefore produce the same levy on the same covered asset value.

At $10,000, the tax is $20. Brokers would determine the dollar value when the covered activity is completed, using their own spot price or, when available, a benchmark from a regulated market-data provider.

The enacted law requires covered brokers to collect and report the levy once implementation begins. The tax must also appear separately from the service price.

The draft would treat a remote broker as maintaining a place of business in Illinois once its gross receipts from covered services sold to Illinois customers reach $100,000.

Court challenges have not settled the tax

The Blockchain Association and Crypto Council for Innovation asked a Sangamon County court on September 9 for a preliminary injunction that would stop enforcement while their lawsuit proceeds. They argue that the tax violates federal and Illinois law, including the federal Internet Tax Freedom Act.

Those claims have not been established by a final court ruling. The reporting available for this article did not confirm whether Illinois has been barred from enforcing the tax.

A separate lawsuit filed by the Digital Chamber in July argues that Illinois unlawfully treats blockchain activity differently from comparable traditional financial transactions. Its court, docket and current posture were not checked.

There is also a repeal bill, HB 5798, in the Illinois House. The latest record reviewed showed that it remained at the filing stage after gaining additional sponsors during September. Its status after September was not confirmed.

For now, the practical distinction is clear enough: ordinary direct wallet transfers and gas payments are outside the draft’s tax, while stablecoin activity, exchange services, certain bridges and some DeFi platform fees may fall inside it. The comment period closes October 30, and the rules can still change before the January 1, 2027 start date.