CFTC Chairman Michael Selig has sharply criticized Illinois' newly enacted Digital Asset Tax Act, which imposes a 0.2% tax on crypto transactions by state residents. In a Washington Times op-ed, Selig called the measure a "sin tax" on blockchain technology and accused lawmakers of "slamming the brakes on technological progress."
The tax, signed by Governor J.B. Pritzker as part of a $55.9 billion budget, applies to exchanges, transfers, and storage of digital assets regardless of profit or loss. For example, a $10,000 crypto purchase and subsequent sale at the same price would incur $40 in taxes despite no gain. The law requires brokers to register with the state by January 2027, with noncompliance carrying up to five years in prison and $25,000 in fines. Lawmakers expect the levy to raise about $60 million annually.
Selig warned the policy runs counter to federal momentum, where Congress is advancing the CLARITY Act to provide a national regulatory framework. He argued that treating identical economic activity differently based on the technology used could undermine Chicago's role as a financial hub and chill innovation. Industry groups like the Crypto Council for Innovation have raised concerns about the law's broad scope and lack of exemptions for routine transfers between a user's own accounts. Law firm Jones Day noted potential constitutional challenges under the Commerce Clause and the Internet Tax Freedom Act, while prediction market Kalshi has already sued the state over related regulatory issues.
