At a glance

  • The DeFi Education Fund, a16z crypto and Uniswap Labs sent comments on Illinois’ draft rules for its new tax on crypto activity, the DeFi Education Fund said on Friday.
  • Their ask, in the group’s words: “keep DEXs and interfaces out of the broker definition, protect self-custody, and don’t tax when we move our own assets.”

Illinois’ Digital Asset Tax Act puts a 0.2% charge on the value of crypto that a broker exchanges, transfers or stores for an Illinois customer. The Illinois Department of Revenue (IDOR) posted draft rules on 28 Sep and took comments until 30 Oct.

What the draft says

The tax only applies when a broker is paid. The draft calls that payment “valuable consideration”, meaning the fees a broker charges for its service.

For decentralised exchanges (DEXs), the line falls on who gets the fee. Swap fees that go “solely to liquidity providers” and network fees for validators do not count. Fees “for the operation and maintenance of de-fi or DEX platforms, like protocol fees” do, and would make the trade taxable.

Moving coins home can count too. In one of the draft’s examples, a customer pays an exchange fee to move assets from a centralised exchange to their own wallet, and “the transfer would be subject to the tax.”

Brokers based outside Illinois are covered once their sales to Illinois customers reach $100,000.

What the DeFi groups say

The DeFi Education Fund argued earlier this month that the protocol-fee test wrongly treats peer-to-peer software as a broker, in its weekly debrief. It compared the approach to the IRS DeFi broker rule that Congress overturned in April 2025.

Miles Jennings of a16z crypto wrote that the draft clashes with how the US Treasury classifies DEXs and with Illinois’ own digital asset consumer protection law.

The court record

The tax is already being challenged. The Digital Chamber sued in July, and the Blockchain Association and the Crypto Council for Innovation sued in August, both in Sangamon County Circuit Court, according to the DeFi Education Fund.

The start date has also moved. A judge signed a stipulated order on 7 Oct pushing the tax back from 1 Jan to 1 Jul 2027, Deloitte said in a tax alert. The draft still cites 1 Jan.

What happens next

The draft has not yet been filed with Illinois’ Secretary of State or the legislative rules committee, IDOR says. A formal proposal would follow and open its own comment period. IDOR had not said publicly on Saturday morning how it would respond to the comments.

The tax is due to start on 1 Jul 2027 unless the courts rule otherwise.

Related: The Binance hack is now an argument for federal exchange rules

This article is for information only and is not investment advice.