Illinois has agreed to postpone the implementation of its 0.2% tax on digital asset activity until July 1, six months later than the previously scheduled Jan. 1 start date, subject to approval by a state court.

The proposed delay follows an agreement between state officials and two industry groups, the Digital Chamber and Illinois Blockchain Association. The Digital Chamber confirmed the agreement to CoinDesk, saying the postponement would allow both sides to concentrate on the ongoing legal challenge to the tax.

Illinois approved the levy in June under its Digital Asset Tax Act. The measure targets crypto activity conducted by businesses with more than $100,000 in receipts and covers transactions as well as the acceptance of digital assets for custody.

Court Must Approve Proposed Delay

The state and industry groups are expected to submit a joint request Thursday morning to the state circuit court in Sangamon County.

If approved, the agreement would remove the immediate need for the parties to litigate over preliminary injunctions. Instead, the case could move toward arguments over the central legal questions surrounding the tax, including its “constitutionality and enforceability.”

Crypto advocacy groups have been challenging the tax since its passage. On Sept. 9, the groups asked the state court to temporarily block the measure, citing the compliance expenses businesses were already incurring ahead of its planned implementation.

Digital Chamber CEO Cody Carbone said the six-month postponement would provide temporary relief while the industry continues its effort to overturn the tax through litigation.

“We’re pleased that the State of Illinois has agreed to delay implementation of its Digital Asset Tax, giving digital asset businesses and users relief from costly compliance obligations while we continue to seek to have this tax permanently repealed through the courts,” Carbone said in a statement.

Legal Challenge Remains Unresolved

The industry groups have challenged the tax on several grounds. They argue that the measure is invalid under Illinois law and unconstitutional. They also contend that the federal Internet Tax Freedom Act preempts the state tax.

The filing reviewed by CoinDesk says the parties are seeking the postponement “in the interest of justice while the matter works towards resolution on the merits.”

If the court grants the request, the six-month extension would only delay the tax. The underlying legal dispute over whether Illinois can impose and enforce the measure would continue.