Illinois is no longer alone.
When the state enacted its 0.2% tax on digital-asset transactions last June, it became the first in the nation to tax digital assets by the transaction rather than the gain. First-in-the-nation is a lonely place to be, until someone follows you there. New York now has a bill on the table, Assembly Bill 8966, proposing the very same levy: 0.2% on the sale or transfer of digital assets, collected by the intermediary and passed through to the user. Not a similar rate. The identical rate.
Two states, the same number, on a network that has never once cared where a state line falls. That is what the beginning of a patchwork looks like.
It is also a movie Washington has seen before.
The 1998 rhyme
In the late 1990s, as the internet went from novelty to infrastructure, state and local governments looked at all that new activity and saw a fresh base to tax. Access charges here, internet-specific levies there, each jurisdiction reaching for its own cut of a network that ran straight through all of them at once. Left alone, the result would have been a thicket of overlapping, inconsistent tolls on a system whose entire value was that it didn’t stop at borders.
Congress stepped in. The Internet Tax Freedom Act, enacted in 1998 and made permanent in 2016, used federal authority to bar states and localities from two things: taxing internet access, and imposing multiple or discriminatory taxes on electronic commerce. The reasoning in the legislative history is worth sitting with, because it reads like it was written for this moment. Congress was acting on commerce that is, in its words, “inherently interstate in nature.” The goal was a “fair and uniform taxing scheme.” The fear was a “patchwork” of “unpredictable and overly burdensome” state internet-specific taxes that would choke a young network before it matured.
Swap “internet” for “digital assets” and you have not changed the problem. You have only changed the medium.
The parallel and its honest limits
Digital assets are the same kind of animal ITFA was written to protect: a borderless, inherently interstate network where value moves without asking permission at a state line. A per-transaction toll on that activity (0.2% in Illinois, 0.2% in the New York proposal) is precisely the kind of state-specific friction ITFA was built to prevent. Layer a dozen states on top of one another, each with its own rate and its own rules, and one national network becomes fifty separate toll booths.
One honest caveat, because precision is the point of this series: ITFA is not a magic wand you can wave at the Illinois tax in court today. Courts have read it narrowly, its discrimination test looks for a comparable non-electronic transaction that a digital-asset transfer doesn’t obviously have, and there are open constitutional questions about how far Congress can go in limiting a state’s power to tax at all.
But that is the wrong way to use it. ITFA’s real value here is as precedent and principle: Congress has already looked at exactly this situation, a national network being nibbled to death by a patchwork of state transaction taxes, and decided the right answer was a single federal line. It did it once. It knows how.
The window that is open right now
Here is why this matters this year and not someday.
Washington is, at this very moment, writing the national tax rulebook for digital assets. Right behind the market-structure fight sits the tax piece: the bipartisan PARITY Act, sponsored by Representatives Max Miller and Steven Horsford and moving through the House Ways and Means Committee. It modernizes how the federal government taxes digital assets: wash-sale rules, stablecoin treatment, staking and mining income, and more.
Notice what it does not do. It says nothing about what a state may charge on top. It draws no line against a patchwork of state transaction taxes. The pen is in Washington’s hand, moving across the page, and the one provision that would actually stop the toll-booth problem simply isn’t written yet.
That is the opening. The same way ITFA drew a bright federal line against a patchwork of state internet taxes, a federal digital-asset tax bill could carry an ITFA-style provision: no state may impose discriminatory or multiple transaction taxes on digital assets. The vehicle exists. It is bipartisan. It is in motion. The language just has to get in before the door closes.
Two honest caveats, because you deserve them. Adding preemption to a tax bill is a real fight: it isn’t in any current draft, and every state guarding its own revenue will push back. And even if it passed, it would face the constitutional questions above. This is a serious, unresolved, uphill effort. It is not a sure thing. Nothing worth doing here is.
What this means for you
The federal fix is the durable answer, the one that protects not just Illinois but everyone standing behind Illinois in line. It is also, honestly, not something any one person moves with a phone call. That’s a national coalition effort, and it will be fought where national coalitions fight.
What you can move is closer to home, and it matters more than it looks.
Illinois went first. That makes Illinois the template, the working proof-of-concept that every revenue-hungry state is now watching to see whether it holds. New York has already copied the number. The single most valuable thing anyone reading this can do is make sure the template fails: that when the next state’s budget office pulls up “the Illinois model,” what they find is a cautionary tale, not a blueprint.
So the fight in front of you is still the one at home. Illinois hasn’t yet written the rules that will make this tax real. That rule-making is coming, and it is where the details get decided. Tell your state representative and senator, in your own words, that Illinois should not be the state that taught the country how to put a toll booth on a borderless network. Then stay on the list, because when the rulemaking window opens, that is the moment your voice carries the most weight.
Congress looked at a borderless network in 1998 and decided a patchwork of state tolls was the wrong way to treat it. Digital assets are asking the same question now. The answer can be the same one, but only if the people who can see it coming say so, loudly, while the federal pen is still moving and while Illinois’s own rule is still unwritten.
Want the country to get one rulebook instead of fifty separate toll booths? Two levers move it. Close to home, tell your Illinois state legislators that this state should not be the template the rest of the country copies: [your Illinois legislators]. And in Washington, tell your members of Congress to write an ITFA-style line into the federal digital-asset tax bill; you can find and contact them by address. Then join the list below, so that when Illinois opens its rule-making window, you are ready to be heard. As always, join the IBC to help move the needle in the right direction.