CFTC Chairman Michael Selig accused Illinois lawmakers of jeopardizing Chicago’s future as a global financial center by imposing a first-of-its-kind state tax on digital asset transactions.
Selig accused the state of moving in the opposite direction of the federal government, noting that the government is working to create a regulatory framework for digital assets.
What exactly is the content of Illinois’ new cryptocurrency tax?
The Digital Asset Tax Act, signed by Governor JB Pritzker as part of a $55.9 billion budget package, makes Illinois the first US state to impose a transaction-level tax on cryptocurrency activity.
The tax is 0.2% of the asset value on any cryptocurrency transfer by an Illinois resident. This applies to exchanges, transfers and even storage of digital assets, and it does not matter whether the user has made a profit or a loss.
According to Coinbase (NASDAQ: COIN) Vice President of Tax Lawrence Zlatkin, an Illinois resident who buys $10,000 in cryptocurrencies and sells them for the same amount, he will owe $40 on both trades despite breaking even.
CFTC Chairman Michael Selig recently published a report Washington Times editorial in He says the new law penalizes cryptocurrency activity while ignoring traditional financial transactions that look quite similar.
“Transferring the same value in a non-crypto asset format would not trigger a tax,” Selig wrote, noting that the state treats similar economic activity differently based on the technology.
he referred to in the law described it as a “sin tax” on blockchain technology and compared the approach to a virtual tax on online transactions in the 1990s. He said such a move would have stifled e-commerce before it matures.
The new law requires brokers to register with the state before doing business with Illinois clients beginning January 1, 2027. Registration begins immediately for any business in Illinois, while a gross revenue threshold of $100,000 determines when taxes begin to be collected. Failure to comply carries a Class 3 felony charge, with penalties of up to five years in prison and a $25,000 fine.
According to the Illinois Policy Institute, lawmakers expect the tax, which takes effect in six months, to generate about $60 million in revenue next year.
Why is Illinois’ tax bill causing such a big problem?
Selig noted that the state law runs counter to current federal momentum. Congress is working on the CLARITY Act, which aims to create a clear regulatory framework for cryptocurrency markets, while the state of Illinois has chosen to move in the opposite direction.
Regulators in Illinois have Classified prediction markets As illegal gambling, putting the state on a collision course with the Commodity Futures Trading Commission (CFTC), which claims exclusive federal jurisdiction over those products.
Selig said in a statement earlier this year that his agency would no longer tolerate states imposing “statewide bans” on prediction market products.
Calci Prediction Market sued Illinois in late June to block new taxes and licensing requirements, arguing that the state violated the Supremacy Clause of the U.S. Constitution. Legal experts expect the question to eventually reach the Supreme Court.
Industry groups, including the Cryptocurrency Innovation Council, have argued that the law contains few meaningful exceptions for shared activities, including transfers between private user accounts. They also suggested that Illinois should have waited until Congress finished working on a national framework for digital assets before creating its own rules.
said law firm Jones Day Tax You could face legal challenges Under the Commerce Clause of the United States Constitution and the Internet Tax Freedom Act. The company also noted that Illinois tax officials have not yet issued rules explaining how assets are valued or what exactly is considered taxable activity.
