The news out of Illinois isn’t great if you are Caleb Williams, quarterback of the Chicago Bears and a noted investor in digital assets. First, the Bears appear poised to leave Illinois for Indiana. And more relevant to this publication, Illinois has enacted a new 0.2% tax on certain digital asset transactions sourced to the state.
The new law, the Digital Asset Tax Act, will take effect on January 1, 2027. The tax applies to a range of digital asset activities connected to Illinois, including the exchange, transfer, or storage of digital assets. Exchanges and brokers with at least $100,000 in Illinois-sourced receipts are responsible for collecting and remitting the tax.
The sourcing rules are notable. In-person transactions are treated as occurring in Illinois when performed at a physical location in the state. For electronic or phone-based transactions, Illinois presumes the activity occurs in the state if customer data reflects an Illinois nexus—such as an Illinois billing address, IP address, or place of primary use.
LEGAL TOKENS
The statute clearly targets exchanges and brokers facilitating substantial digital asset activity with an Illinois connection. Less clear, however, is how the tax applies to more complex structures commonly used in the digital asset space, including hedge funds and digital asset custody or vault arrangements.
For example, it does not appear that U.S.-based exchanges are required to “look through” Delaware partnerships or other investment vehicles to determine whether beneficial owners include Illinois taxpayers. Absent such a requirement, certain indirect holdings may fall outside the practical reach of the tax’s collection framework—though future guidance could address this point.
Similarly, funds managed by Illinois-based investment managers may present additional uncertainty. To the extent that investment decisions are made in Illinois, one could argue that those activities satisfy the statute’s sourcing rules. However, the application of the Digital Asset Tax Act to discretionary investment management functions is not expressly addressed and remains an open question.
A Cross-Border Twist
Caleb Williams may not be thrilled about the Bears’ potential move across state lines. But if he is an active participant in digital asset markets, that move could have unintended tax benefits. Reduced Illinois nexus could mean fewer transactions subject to the new tax.
If that’s right, Illinois may face a double loss—its football team and some digital asset–related tax revenue.
Seward & Kissel LLP actively monitors legal and regulatory changes and their impact on the digital assets industry. For additional information, please contact a member of Seward & Kissel’s Digital Assets Group.
