CFTC Chair Michael Selig criticized Illinois lawmakers over a proposed 0.2% tax on cryptocurrency transactions, saying the measure could slow innovation in digital assets.

Selig made the remarks in a July 1 statement, arguing that the tax would set back innovation in digital assets.

The tax is part of Illinois' fiscal 2027 budget and is scheduled to take effect on January 1, 2027.

It requires brokers to register with the Illinois Department of Revenue, collect the tax as a separate line item, and file monthly reports on covered digital asset activity.

The law applies to certain digital asset activities conducted by brokers, including exchange, transfer, custody, and wallet services, and could also affect firms outside Illinois that serve users in the state.

Selig said the tax applies to transfers that generate no economic gain and could place Illinois residents and businesses at a disadvantage compared with other jurisdictions.

He also noted that the measure may conflict with federal efforts to develop a uniform crypto market structure.

Industry figures, including Strategy co‑founder Michael Saylor, have called the proposal a mistake, warning it could increase costs for users and lead firms to leave the state.

Critics have raised concerns about how exchanges, wallet providers, and custodians would track transactions and determine tax liability.

The Illinois dispute emerges as Congress reviews broader crypto tax proposals and federal agencies consider market structure rules.

The CFTC and SEC have opened a joint review of derivatives, margining, and market structure issues.

The criticism underscores a growing split between state-level tax policy and federal regulatory initiatives.