The usual first: I’m not a lawyer, and this isn’t legal advice. This is my best understanding as a regular person who has read the statute closely, and I’ll correct it the moment somebody shows me I’ve got it wrong. That’s how this series works.
Start with a sentence from the law itself.
Section 3-30 of the Digital Asset Tax Act says that on or after January 1st, 2027, “it is unlawful for any person to engage in business as a digital asset broker in Illinois without a certificate of registration from the Department of Revenue.”
Now the next sentence, which is the one I want you to sit with. The application for that certificate “shall be made to the Department, by electronic means, in the form and manner prescribed by the Department.”
The Department has not prescribed one. There is no form. There are no rules. As I write this, there is not a single line of published guidance telling a business how to register, or how to know whether it has to.
It is roughly 120 days until that deadline.
Let me give away the strongest thing the state has
Before I go further, I want to hand over the point that people on the other side of this would use against me, because if I don’t say it first, this whole piece is worth less.
Felony penalties in tax law are completely normal. They are not some special cudgel invented for digital assets. Illinois attaches criminal liability to failures to file and failures to keep records across its tax code. The same session’s advertising tax carries the same structure. Tobacco and cannabis taxes carry felonies. If your objection to this law is “they made a tax crime out of it,” that objection does not survive contact with anyone who works in state tax. They will tell you, correctly, that this language is boilerplate, and they will be right.
So that is not my complaint. Not even a little.
My complaint is about timing, and it is narrow enough that I think it is very hard to answer.
Three things nobody can tell you
Here is what a business would need to know in order to comply. Read these and ask yourself who, today, could answer them.
One: are you even a broker? Section 3-15 defines “digital asset broker” by pointing at Section 6045(c)(1)(D) of the federal Internal Revenue Code, plus “any regulations as the Secretary of the Treasury may prescribe.” So Illinois did not write its own definition. It borrowed one, from a federal rulebook that has itself been rewritten and fought over in recent years. To find out whether Illinois law applies to you, you first have to resolve a live federal question. That’s a strange way to build the foundation of a criminal offense.
Two: what counts as one taxable event? The Act taxes “any single occurrence” of exchanging, transferring, or storing a digital asset. It never says whether continuously holding a customer’s asset is one occurrence, or a monthly one, or something else. I walked through this in the last post: one ordinary purchase can plausibly generate two or three separate taxable events. Nobody can tell you which reading is right, because nobody has written it down.
Three: where is your customer? Section 3-25 sets up a presumption that a customer is in Illinois based on a home address, a mailing address, an internet protocol address, or other data indicating “place of primary use.” Then it says the burden of proving a customer is not in Illinois falls on the broker. The statute even lets a broker build “reasonable categorization standards” to sort this out, and then says in the same breath that relying on those standards does not relieve the burden of proof.
Three unanswered questions, and the law’s answer to all three is the same: the Department will sort it out later.
What “later” costs
Section 3-55 is short and worth reading carefully. A digital asset broker who fails to file a return, or who fails to keep books and records as required, or “who violates any other provision of this Act,” is guilty of a Class 3 felony. In Illinois, that generally carries two to five years and a fine up to $25,000. Prosecution can be brought within five years of the act.
Notice that “violates any other provision of this Act” would include Section 3-30. The registration requirement.
I want to be careful here, because this is exactly where our side tends to overreach. I do not believe that an honest mistake sends anyone to prison. Courts generally read an intent requirement into criminal statutes even when the text doesn’t spell one out, and I’d expect that to happen here. But look at the text: the word “willfully” appears in the clause about violating a Department rule, and it does not appear in the clauses about failing to file or violating other provisions of the Act. Whether courts read intent into the rest of it is one more thing nobody can tell you in advance.
That’s the pattern. Every road leads back to the same place: we’ll find out later.
Who this actually falls on
Plainly, because the internet is full of people getting this wrong: these penalties apply to the businesses and their officers, not to you for moving your own coins. If you see a post claiming an ordinary Illinoisan can catch a felony for transferring their own bitcoin, that is not what this law says, and repeating it costs us credibility we can’t spare.
But don’t mistake that for good news, because it reaches you anyway, by two routes.
The first is cost. Compliance uncertainty is expensive. Legal opinions, engineering work, a system that can source customers by state, and a reserve against a liability nobody can size yet. Those costs get passed to customers, which in practice means the person putting fifty dollars a week into savings, not the trading desk.
The second is simpler. Some businesses will look at a criminal statute they cannot confidently comply with and decide that Illinois customers are not worth it. You won’t get a notice about that. You’ll just find that a service you use no longer serves your state.
Is this a real legal problem, or just unfair?
I think it’s both, and I want to be honest about the difference.
The legal version is a due-process argument about fair notice: a law has to tell people what it requires before punishing them for getting it wrong, and courts look harder at that question when the conduct is criminal than when it’s merely taxed. Independent observers have flagged this. The trade association that sued the state in Sangamon County on July 21st raised vagueness among its claims, arguing among other things that the Department has issued no regulations on when blockchain operations constitute one or multiple taxable occurrences, or on how customer location is to be determined. National tax and law firms have spent the summer telling clients the same thing in politer language: start preparing now, because there are no implementing regulations and the basic questions are open.
But I’d rather not rest this on a courtroom. Courts move slowly, no one has ruled, and anyone promising you an outcome is guessing.
The fairness version needs no judge. It’s just this: the state set a criminal deadline and hasn’t written what has to be done by it.
The state’s best answer, and why it doesn’t close the gap
Here it is at full strength, because a weak version wouldn’t be worth printing.
The Department has full rulemaking authority under the Illinois Administrative Procedure Act, and it will use it. Agencies write implementing rules after a statute passes all the time; that is the ordinary sequence, not a scandal. Businesses routinely operate under evolving guidance. And realistically, nobody is getting charged on January 2 for a definitional judgment call made in good faith.
Most of that is true. But it doesn’t reach the problem.
Rulemaking takes months, and it has not visibly started. The deadline is written into the statute; it does not move because the guidance is late. And “prosecutors probably won’t” is not a compliance plan. You cannot build a system, budget a reserve, or sign an acceptance of responsibility on the strength of somebody’s expected restraint. That signature, by the way, is required by Section 3-30: a named person has to personally accept responsibility for filing and paying. Ask that person how comfortable they are signing a form that doesn’t exist yet, for a law whose terms nobody can define.
The fix has a name
This one is unusually fixable, and there are three versions of the fix. They aren’t mutually exclusive.
The Department can move first. Publish the registration form and the definitional guidance well before January 1st, with real time for the public to respond. Say what a broker is. Say what one taxable occurrence is. Say what sourcing evidence is sufficient. None of that requires the legislature.
The legislature can move the date. If the rules aren’t going to be ready, the criminal exposure shouldn’t start before they are. A short delay costs the state almost nothing and removes the sharpest edge of this problem entirely.
Or the legislature can repeal it. House Bill 5798, filed June 22, would repeal the Digital Asset Tax Act outright. Whatever you think of the tax itself, the bill exists and has a number, which makes it something you can actually name in a letter.
The ask
Learn this well enough to say it to a neighbor in your own words: Illinois made it a crime to operate without a certificate the state hasn’t created yet, under a definition nobody can apply. Fix the rules or move the date.
Then write your own State Senator and Representative. Not a form letter; four sentences in your own words does more than a hundred identical ones. Tell them you’re an Illinois constituent, that the digital asset tax attaches felony exposure to rules the Department of Revenue hasn’t written, that HB 5798 or a delay of the effective date would fix it, and one sentence about why it matters to you specifically. That last sentence is the one their staff actually reads.
And this week in particular: if you run a business that might be a “broker” under this law, I want to hear from you. Not for a press release. Because the people who can describe, concretely, what it’s like to try to comply with this are the most useful voices in the room, both in Springfield and when the Department finally opens its rules for comment. If that’s you, get on the list.
We don’t win this by being loud. We win it by being right, by being clear, and by being impossible to ignore. Stay informed at illinoisbitcoincouncil.org/il-digital-asset-tax. Join us at illinoisbitcoincouncil.org/membership.
Again: not a lawyer, not legal advice, very much a work in progress. If you practice Illinois tax or criminal law and think I’ve mischaracterized the fair-notice question, or the mens rea point, please tell me. Being corrected in public is cheaper than being wrong in public.
Sources
The registration mandate and the criminal deadline: Digital Asset Tax Act, Section 3-30
The borrowed broker definition: Section 3-15, referencing 26 U.S.C. Section 6045(c)(1)(D)
“Any single occurrence” of exchanging, transferring, or storing: Section 3-15
Sourcing and the burden of proof on the broker: Section 3-25
Class 3 felony provisions and the five-year limitations period: Section 3-55
Department rulemaking authority: Sections 3-65 and 3-70, under the Illinois Administrative Procedure Act
The tax itself: Digital Asset Tax Act, Public Act 104-0468 (SB 3019, Article 3), effective January 1st, 2027
The litigation: Chamber of Digital Commerce v. Harris, Circuit Court of Sangamon County, filed July 21st, 2026
The repeal bill: HB 5798, 104th General Assembly, filed June 22, 2026