Uniswap, a16z and Paradigm move to stop Illinois from taxing DeFi like brokers

A coalition of DeFi builders led by Uniswap, Andreessen Horowitz (a16z) and Paradigm have filed a court brief supporting the crypto industry’s lawsuit against Illinois’s 0.2% digital asset tax.

The coalition is warning that the state’s draft rules would turn fee-charging decentralized exchanges and their frontends into tax-collecting brokers.

It is like a repeat of a fight that many thought was already won in Washington, but this time around it is at the state level. In April 2025, Congress and President Donald Trump scrapped a federal IRS rule that would have forced DeFi platforms to report user transactions as if they were brokers.

Who signed on, and who else is in the fight?

The brief was filed in the Circuit Court of Sangamon County and backs a challenge brought by the Crypto Council for Innovation (CCI) and the Blockchain Association.

The other signatories to the brief alongside the DeFi Education Fund, a16z, Paradigm and Uniswap, are Aave Labs, Aptos Labs, Aztec Labs, Chainlink Labs, Jito Labs, Orca Creative, Phantom Technologies, Multicoin Capital, the Solana Policy Institute and Stand With Crypto.

The coalition is also not without support from the federal level, as the Blockchain Association said the US Department of Justice filed a statement of interest on November 6, arguing the tax “undermines federal policy and American leadership in digital assets.”

The US Chamber of Commerce and the Securities Industry and Financial Markets Association (SIFMA) also filed their own amicus brief the same day.

The association warned that the levy would go beyond crypto-native firms to reach banks, broker-dealers, and custodians that offer digital asset products.

Why are builders saying that a DEX cannot collect tax?

a16z’s head of policy, Miles Jennings, shared his thoughts on the matter on October 30 after he said that his organization, The DeFi Education Fund, and Uniswap were joining the fight against the tax act.

He said the state’s approach was not possible to comply with, as “autonomous software is not a person that can collect a tax.”

There is also a draft provision in the act that requires brokers to store the private keys of customers, and it was flagged in an October letter. The signatories say that it would expose users to theft.

They asked regulators to swap the term for “public keys” instead.

When was the tax act signed and who is fighting against it?

The legislation that is causing the lawsuits was signed by Governor JB Pritzker as the Illinois Digital Asset Tax Act in June 2026. It was part of the state’s fiscal 2027 budget.

It imposes a 0.2% charge on the value of a digital asset each time an Illinois customer exchanges, transfers, or stores it through a broker.

The charge is there even when there is no sale or gain made by the customer, and it carries a class 3 felony charge for noncompliance.

Stakeholders have since taken the state to court over the law. The first was the Digital Chamber, which sued in July, while CCI and the Blockchain Association followed in September.

In October, the state agreed to postpone the tax from January 1, 2027, to July 1, 2027, while the litigation proceeds.

Where did the DeFi broker rule come from?

In December 2024, at the dawn of the Biden administration, the Treasury Department finalized a rule that would have seen platforms that facilitate digital asset transactions file Form 1099-DA on user activity. This was the DeFi broker rule, and it was to take effect in 2027.

However, the rule will not be activated by the due date, as President Trump killed it when he signed a congressional review act resolution on it on April 10, 2025.

The current dispute in Illinois is going to show if the state can prevail where the federal government had a rethink, or if the industry can wave off a state’s rule that challenges the ways decentralized exchanges currently operate.