a16z, Uniswap and the DeFi Education Fund tell Illinois its 0.2% crypto tax rules would amount to a ban on DeFi

Three of the biggest names in decentralized finance have told Illinois that its plan to tax crypto trades would, as written, amount to a ban on DeFi in the state. In a comment letter dated October 30, Andreessen Horowitz, Uniswap Labs and the DeFi Education Fund responded to draft rules the Illinois Department of Revenue posted on September 28 to implement the Digital Asset Tax Act, proposed as 86 Ill. Adm. Code Part 497.

The act, passed in June, imposes a 0.2% tax on the value of covered digital asset transactions rather than on profits, according to Bitcoin.com News, which reported that the state has already pushed the start from January 1 to July 1, 2027 while industry groups challenge the law in court. The letter's central objection is that the draft treats decentralized exchanges and the websites used to reach them as "digital asset brokers." Software, the groups argue, cannot identify customers, work out where they live, add a tax, register, file returns or remit money, so the only way to comply would be to stop serving Illinois. The letter notes that failing to file as a broker is a Class 3 felony and cites an estimate from the National Cryptocurrency Association that about 2.64 million Illinois residents hold digital assets.

"Autonomous software is not a person that can collect a tax," a16z's head of policy, Miles Jennings, wrote on X, according to Bitcoin.com News.

The groups ask the department to confirm that neither DEXs nor their interfaces are brokers, to say that collecting a protocol or interface fee does not create broker status, to replace a requirement that brokers keep customers' private keys with public keys, and to leave withdrawals to a user's own wallet and movement between blockchains outside the tax. They also want the rules held until an Illinois court rules on the tax, and in no case before July 1, 2027. The department has not responded in the sources reviewed.