a16z, Paradigm and Uniswap Labs Back Illinois Crypto Tax Challenge
An 18-group coalition says Illinois’s 0.2% digital asset tax blurs the line between brokers and software providers that cannot collect it from users.
Key Notes
- Eighteen crypto organizations seek permission to support existing lawsuits against Illinois’s 0.2% digital asset tax.
- The coalition argues that the law could impose collection duties on software providers without custody or customer records.
- The groups also challenge different tax treatment of comparable financial activities under state and federal law.
Andreessen Horowitz, Paradigm, Uniswap Labs and the DeFi Education Fund are leading an 18-organization effort to support lawsuits against Illinois’s 0.2% digital asset tax, arguing that its reach could extend beyond brokers to software developers unable to collect it.
The coalition’s November 11 court filing asks permission to submit an amicus, or friend-of-the-court, brief in Sangamon County Circuit Court. The groups are supporting existing plaintiffs, rather than bringing a new lawsuit.
DeFi Education Fund announced the effort Thursday. Other participants include Aave Labs, Chainlink Labs, Hyperliquid Policy Center, Jito Labs, Multicoin Capital, Phantom Technologies and Stand With Crypto.
A Tax on Asset Value
The Digital Asset Tax Act, signed by Governor JB Pritzker in June as part of Illinois’s fiscal 2027 budget, imposes a 0.2% levy on covered exchange, transfer and storage services received by Illinois customers through digital asset brokers.
The charge is calculated on the relevant asset’s value, rather than the customer’s capital gain. A covered transaction involving $10,000 of cryptocurrency would therefore generate $20 in tax, with the broker responsible for collection.
The statute specifies a January 1, 2027 start. Separately, the Blockchain Association said in an October 13 litigation update that Illinois had agreed to an injunction pausing effectiveness and enforcement until July 1, 2027. That agreement does not resolve the challenges to the law.
Software Developers Challenge the Broker Boundary
The proposed brief distinguishes centralized exchanges, which typically maintain customer accounts and control assets, from developers supplying wallets, interfaces, smart contracts and blockchain infrastructure.
For many noncustodial services, users authorize transactions themselves. Publishing the software does not necessarily give its developer control over those transfers, access to customer records or a commercial relationship with everyone using it.
The coalition argues that Illinois’s definitions blur those differences. Developers could face collection duties without holding funds, knowing where users live or having customers from whom to collect the tax.
September’s draft rules distinguish protocol fees from fees paid solely to liquidity providers, miners or validators. As CoinScreamer’s earlier coverage explained, those distinctions affect which DeFi services the agency proposes to tax. The coalition disputes that interpretation’s legality.
A Separate Discrimination Argument
The groups also argue that Illinois treats comparable financial activities differently depending on the technology involved. Their brief contrasts the crypto levy with exchanges, transfers and storage involving stocks, bonds, precious metals and conventional bank deposits.
They contend that this violates the Illinois Constitution’s tax-uniformity requirement and the federal Internet Tax Freedom Act. Those are legal arguments submitted in support of the plaintiffs, not findings that the court has adopted.
The request adds technical evidence to the existing dispute over whether Illinois can apply a broker-based collection system across a market where many software providers never take custody of customer assets.
Disclaimer: CoinScreamer is an independent media brand owned and operated by NuvexMedia LLC, publishing news, research, and market insights on digital assets and related technologies. NuvexMedia LLC invests in and collaborates with companies across the digital asset, blockchain, and technology sectors. These relationships do not influence CoinScreamer’s editorial coverage, and the publication maintains full editorial independence to provide accurate, timely, and objective information. © 2025 NuvexMedia LLC. All rights reserved. This content is for informational purposes only and should not be considered legal, tax, investment, financial, or other professional advice.
