Illinois has approved a 0.2% tax on cryptocurrency transactions, with the new requirement set to begin next year.

A crypto industry lobbying group has launched a legal challenge against Illinois, targeting a digital asset tax provision that was inserted into the state budget shortly before the legislative session ended.

The Digital Chamber argues that Illinois’ Digital Asset Tax Act violates both the state and U.S. constitutions and is overridden by federal tax law. The organization filed a lawsuit on Tuesday requesting that a federal court stop the state from enforcing the tax.

The lawsuit claims the measure violates Illinois’ constitutional requirements for tax uniformity and due process, while also conflicting with the U.S. Constitution’s Commerce Clause and the Internet Tax Freedom Act by applying special treatment to digital asset transactions.

The tax legislation was passed quickly during the final days of Illinois’ annual legislative session. Under the law, the 0.2% levy applies to companies based in Illinois or firms providing digital asset-related services that generate more than $100,000 in gross receipts. The rule is scheduled to take effect in January.

The Digital Chamber argues that the Internet Tax Freedom Act established protections against discriminatory state and local taxes on digital commerce, making the Illinois tax measure legally flawed.

The group’s filing states that the law fails to distinguish between transactions involving profits or losses, realized or unrealized gains, and transfers that do or do not change ownership. Instead, it argues that the tax draws a line only between conventional financial systems and blockchain-based infrastructure.

The complaint further states that federal law separates an asset from the technology used to record ownership, arguing that no existing legal framework creates a tax distinction based solely on the method used to maintain ownership records.

The lawsuit, filed on behalf of Digital Chamber members, asks the court to declare the tax unconstitutional under both state and federal law, prevent Illinois from enforcing the legislation, and award legal expenses and fees to the organization.