Crypto Billionaires Warn California: ‘Billionaire Tax’ Risks Web3 Exodus

Core Insights - California is set to introduce a one-time 5% wealth tax on billionaires in 2026, which has raised concerns among tech and crypto founders about a potential "innovation exodus" from the state [1][3] - Investor Chamath Palihapitiya highlights that California has already lost over $200 billion in tax revenue due to wealthy founders relocating, which impacts job creation and startup funding [2] - The proposed tax could force founders to liquidate portions of their illiquid startup shares or crypto holdings to meet tax obligations, potentially leading to unfavorable market conditions [4] Tax Implications - The "Billionaire Tax Act" will apply to large fortunes, including startup shares and crypto assets, regardless of their liquidity status [3] - Founders are concerned that the tax may compel them to sell equity at unfavorable prices or relocate their businesses to more tax-friendly states [4][5] Regulatory Environment - The introduction of the wealth tax coincides with increased regulatory scrutiny on crypto companies in the U.S., which may deter founders from establishing their businesses in California [3][6] - California's Digital Financial Assets Law, effective July 2025, is expected to impose a licensing regime similar to New York's BitLicense, which has previously driven major exchanges out of New York [6]