0.2% Illinois crypto levy in focus as CFTC chief flags risk to Chicago trading flows

Commodity Futures Trading Commission (CFTC) Chairman Mike Selig has publicly criticized a new Illinois law imposing a 0.2{d19616a33d455f7215be86882b84de16bc0d6d703bafb84e8d0ba56683c22428} tax on every crypto transaction, warning it could push financial firms out of the state. The law, passed in July as part of Illinois’ fiscal budget, is scheduled to take effect in January 2027.

Selig argued the levy was unnecessary given that federal lawmakers are already working on the CLARITY Act, a bill aimed at bringing regulatory clarity to crypto markets. He said Illinois legislators had effectively overridden years of federal effort with a punitive local measure, writing that state lawmakers “decided they know better than the federal lawmakers who have been working on delivering clarity to crypto asset markets for years.”

“Chicago’s last trade”

Illinois is home to the Chicago Mercantile Exchange (CME), the world’s largest derivatives exchange, which also runs 24/7 crypto trading. Selig suggested the new tax could drive investors and trading activity away from the state entirely.

He wrote that “as blockchain technology continues to transform our financial markets, the choice to loot crypto wallets rather than grow the state economy with pro-innovation policies may go down in history as Chicago’s last trade,” framing the phrase as a warning about the long-term cost of the policy to the state’s financial standing.

Coinbase’s chief legal officer, Paul Grewal, echoed the criticism, calling the transaction tax “one of the dumb policies” and adding that “there is no more effective way to kill an innovation than to tax its mere use.” Grewal said residents of Illinois “deserve better.”

Federal tax relief still far off

Even if it clears Congress, the CLARITY Act would do little to address crypto taxation directly, since its focus is on market structure and onshoring digital asset activity rather than tax policy. The bill currently remains stuck in the Senate, meaning it would provide no immediate tax relief for US crypto users even if passed today.

Separately, the US House of Representatives has reviewed seven tax proposals aimed at crypto-specific issues, including the double taxation of mining and staking rewards. However, progress on these measures is expected to be slow given the limited legislative calendar ahead of the November midterm elections.

Any renewed momentum on federal crypto tax reform is likely to depend on the outcome of the midterms and which party controls Congress afterward. Until then, US crypto holders may continue to face an uneven patchwork of state-level rules, with Illinois’ 0.2{d19616a33d455f7215be86882b84de16bc0d6d703bafb84e8d0ba56683c22428} transaction tax set to take effect regardless of the federal timeline.

Read more: ESMA Reminds Crypto Firms MiCA Transition Period Is Ending in the EU