Illinois General Assembly - 205 ILCS 731/ Digital Assets and Consumer Protection Act.

(205 ILCS 731/Art. 5 heading) Article 5. Customer Protections (Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/5-5)

Sec. 5-5. Customer disclosures.

(a) When engaging in digital asset business activity with a resident, a covered person shall provide to a resident the customer disclosures required by subsection (b) and any additional disclosures the Department by rule determines to be necessary and appropriate for the protection of residents. The Department may determine by rule the time and form required for disclosures. A disclosure required by this Section shall be made separately from any other information provided by the covered person and in a clear and conspicuous manner in a record the resident may keep.

(b) Before engaging in digital asset business activity with a resident, a covered person shall disclose, to the extent applicable to the digital asset business activity the covered person will undertake with the resident, subject to any rule or order issued by the Department, all of the following:

(1) A schedule of fees and charges the covered person may assess, the manner by which fees and charges will be calculated if they are not set in advance and disclosed, and the timing of the fees and charges.

(2) Whether the product or service provided by the covered person is covered by either of the following:

(A) A form of insurance or other guarantee against loss by an agency of the United States as follows:

(i) Up to the full United States dollar equivalent of digital assets placed under the custody or control of, or purchased from, the covered person as of the date of the placement or purchase, including the maximum amount provided by insurance under the Federal Deposit Insurance Corporation or National Credit Union Administration or otherwise available from the Securities Investor Protection Corporation.

(ii) If not provided at the full United States dollar equivalent of the digital assets placed under the custody or control of or purchased from the covered person, the maximum amount of coverage for each resident expressed in the United States dollar equivalent of the digital asset.

(iii) If not applicable to the product or service provided by the covered person, a clear and conspicuous statement that the product is not insured, as applicable, by the Federal Deposit Insurance Corporation, National Credit Union Administration, or the Securities Investor Protection Corporation.

(B)(i) Private insurance against loss or theft, including cybertheft or theft by other means.

(ii) A covered person shall disclose the terms of the insurance policy to the resident in a manner that allows the resident to understand the specific insured risks that may result in partial coverage of the resident's assets.

(3) The irrevocability of a transfer or exchange and any exception to irrevocability.

(4) A description of all of the following:

(A) The covered person's liability for an unauthorized, mistaken, or accidental transfer or exchange.

(B) The resident's responsibility to provide notice to the covered person of an unauthorized, mistaken, or accidental transfer or exchange.

(C) The basis for any recovery by the resident from the covered person in case of an unauthorized, mistaken, or accidental transfer or exchange.

(D) General error resolution rights applicable to an unauthorized, mistaken, or accidental transfer or exchange.

(E) The method for the resident to update the resident's contact information with the covered person.

(5) That the date or time when the transfer or exchange is made and the resident's account is debited may differ from the date or time when the resident initiates the instruction to make the transfer or exchange.

(6) Whether the resident has a right to stop a preauthorized payment or revoke authorization for a transfer and the procedure to initiate a stop-payment order or revoke authorization for a subsequent transfer.

(7) The resident's right to receive a receipt, trade ticket, or other evidence of the transfer or exchange.

(8) The resident's right to at least 14 days' prior notice of a change in the covered person's fee schedule, other terms and conditions that have a material impact on digital asset business activity with the resident, or the policies applicable to the resident's account.

(9) That no digital asset is currently recognized as legal tender by the State of Illinois or the United States.

(10)(A) A list of instances in the past 12 months when the covered person's service was unavailable to customers seeking to engage in digital asset business activity due to a service outage on the part of the covered person and the causes of each identified service outage.

(B) As part of the disclosure required by this paragraph, the covered person may list any steps the covered person has taken to resolve underlying causes for those outages.

(11) A disclosure, provided separately from the disclosures provided pursuant to paragraphs (1) to (10) of this subsection and written prominently in bold type, that the State of Illinois has not approved or endorsed any digital assets or determined if this customer disclosure is truthful or complete.

(c) Except as otherwise provided in subsection (d), at the conclusion of a digital asset transaction with, or on behalf of, a resident, a covered person shall provide the resident a confirmation in a record which contains all of the following:

(1) The name and contact information of the covered person, including the toll-free telephone number required under Section 5-20.

(2) The type, value, date, precise time, and amount of the transaction.

(3) The fee charged for the transaction, including any charge for conversion of a digital asset to fiat currency or other digital asset, as well as any indirect charges.

(d) If a covered person discloses that it will provide a daily confirmation in the initial disclosure under subsection (c), the covered person may elect to provide a single, daily confirmation for all transactions with or on behalf of a resident on that day instead of a per transaction confirmation.

(Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/5-10)

Sec. 5-10. Custody and protection of customer assets.

(a) A covered person that stores, holds, or maintains custody or control of a digital asset for one or more persons shall:

(1) at all times maintain an amount of each type of digital asset sufficient to satisfy the aggregate entitlements of the persons to the type of digital asset;

(2) segregate such digital assets from the other assets of the covered person; and

(3) not sell, transfer, assign, lend, hypothecate, pledge, or otherwise use or encumber such digital assets, except for the sale, transfer, or assignment of such digital assets at the direction of such other persons.

(b) If a covered person violates subsection (a), then the property interests of the persons in the digital asset are pro rata property interests in the type of digital asset to which the persons are entitled without regard to the time the persons became entitled to the digital asset or the covered person obtained control of the digital asset.

(c) A digital asset subject to this Section is:

(1) held for the persons entitled to the digital asset under subsection (a);

(2) not the property of the covered person; and

(3) not subject to the claims of creditors of the covered person.

(d) Digital assets subject to this Section, even if commingled with other assets of the covered person, are held in trust for the benefit of the persons entitled to the digital assets under subsection (a), in the event of insolvency, the filing of a petition by or against the covered person under the United States Bankruptcy Code (11 U.S.C. 101 et seq.) for bankruptcy or reorganization, the filing of a petition by or against the covered person for receivership, the commencement of any other judicial or administrative proceeding for its dissolution or reorganization, or an action by a creditor against the covered person who is not a beneficiary of this statutory trust. No digital asset impressed with a trust pursuant to this subsection shall be subject to attachment, levy of execution, or sequestration by order of any court, except for a beneficiary of this statutory trust.

(e) The Department may adopt rules applicable to covered persons related to additional protections of customer assets, including, but not limited to:

(1) rules requiring that digital assets and funds controlled by the covered person on behalf of residents be held in accounts segregated from the covered person's own digital assets and funds;

(2) rules related to qualified custodians that may hold such segregated accounts;

(3) rules related to titling of such segregated accounts;

(4) rules related to audit requirements for customer assets;

(5) rules requiring compliance with specific provisions of the Uniform Commercial Code applicable to digital assets;

(6) rules restricting selling, transferring, assigning, lending, hypothecating, pledging, or otherwise using or encumbering customer assets; and

(7) any rules as may be as may be necessary and appropriate for the protection of residents or necessary to effectuate the purposes of this Section.

(Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/5-15)

Sec. 5-15. Covered exchanges.

(a)(1) Except as provided for under paragraph (2) of this subsection, a covered exchange, before listing or offering a digital asset that the covered exchange can exchange on behalf of a resident, shall certify on a form provided by the Department that the covered exchange has done the following:

(A) Identified the risk that the digital asset would be deemed a security by federal or state regulators.

(B) Provided, in writing, full and fair disclosure of all material facts relating to conflicts of interest that are associated with the covered exchange and the digital asset.

(C) Conducted a comprehensive risk assessment designed to ensure consumers are adequately protected from cybersecurity risk, risk of malfeasance, including theft, risks related to code or protocol defects, market-related risks, including price manipulation and fraud, and any other material risks.

(D) Established policies and procedures to reevaluate the appropriateness of the continued listing or offering of the digital asset, including an evaluation of whether material changes have occurred.

(E) Established policies and procedures to cease listing or offering the digital asset, including notification to affected consumers and counterparties.

(F) Any other requirement designated by rule by the Department as may be necessary and appropriate for the protection of residents.

(2) Certification by a covered exchange shall not be required for any digital asset approved for listing on or before the effective date of this Act by the New York Department of Financial Services pursuant to Part 200 of Title 23 of the New York Code of Rules and Regulations, if the covered exchange provides notification to the Department on a form provided by the Department.

(3) After a finding that a covered exchange has listed or offered a digital asset without appropriate certification or after a finding that misrepresentations were made in the certification process, the Department may require the covered exchange to cease listing or offering the digital asset and may take an enforcement action under Section 20-50 of this Act.

(b)(1) A covered exchange shall make every effort to execute a resident's request to exchange a digital asset that the covered exchange receives fully and promptly.

(2)(A) A covered exchange shall use reasonable diligence to ensure that the outcome to the resident is as favorable as possible under prevailing market conditions. Compliance with this paragraph shall be determined by factors, including, but not limited to, all of the following:

(i) The character of the market for the digital asset, including price and volatility.

(ii) The size and type of transaction.

(iii) The number of markets checked.

(iv) Accessibility of appropriate pricing.

(v) Any other factor designated by rule by the Department as may be necessary and appropriate for the protection of residents.

(B) At least once every 6 months, a covered exchange shall review aggregated trading records of residents against benchmarks to determine execution quality, investigate the causes of any variance, and promptly take action to remedy issues identified in that review.

(3) In a transaction for or with a resident, the covered exchange shall not interject a third party between the covered exchange and the best market for the digital asset in a manner inconsistent with this subsection.

(4) If a covered exchange cannot execute directly with a market and employs other means in order to ensure an execution advantageous to the resident, the burden of showing the acceptable circumstances for doing so is on the covered exchange.

(Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/5-20)

Sec. 5-20. Customer service; requests for assistance.

(a) A covered person shall prominently display on its internet website a toll-free telephone number through which a resident can contact the covered person for requests for assistance and receive live customer assistance, subject to any rules adopted by the Department.

(b) A covered person shall implement reasonable policies and procedures for accepting, processing, investigating, and responding to requests for assistance in a timely and effective manner. Such policies and procedures shall include all of the following:

(1) A procedure for resolving disputes between the covered person and a resident.

(2) A procedure for a resident to report an unauthorized, mistaken, or accidental digital asset business activity transaction.

(3) A procedure for a resident to file a complaint with the covered person and for the resolution of the complaint in a fair and timely manner with notice to the resident as soon as reasonably practical of the resolution and the reasons for the resolution.

(4) Any other procedure designated by rule by the Department as may be necessary and appropriate for the protection of residents.

(Source: P.A. 104-428, eff. 8-18-25.)

(205 ILCS 731/5-25)

Sec. 5-25. Collection of compensation. Unless exempt from registration under this Act, no person engaged in or offering to engage in any act or service for which a registration under this Act is required may bring or maintain any action in any court to collect compensation for the performance of the registrable services without alleging and proving that he or she was the holder of a valid registration under this Act at all times during the performance of those services.

(Source: P.A. 104-428, eff. 8-18-25.)