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

[Ben Graham]

California is planning to hit billionaires with a new one-time wealth tax in 2026, and it sparked loud warnings from tech and crypto founders about an “innovation exodus.” However, crypto markets did not swing on the headlines, but the battle over where builders live and launch still shapes where new projects list, hire, and pay tax.

For us, this fight decides whether the next big exchange, wallet, or DeFi app launches in the US or somewhere more crypto friendly.

Investor Chamath Palihapitiya says California already lost more than $200 billion in tax revenue as wealthy founders moved out of state, according to The Times of India. This capital flight matters because it pulls jobs, offices, and new startup funding with it as when the people who fund crypto startups leave, you feel it later as fewer options and more limited services on your favorite platforms.

This debate also lands while US regulators step up pressure on crypto companies nationwide. As we covered in our piece on changing US oversight in US crypto regulation, rules already push founders to think twice about building in America. A state-level tax fight in California adds one more question.

Do I really want to base my company here?”

What Exactly is California Planning, and Why Are Crypto Leaders Angry?

The 2026 “Billionaire Tax Act” in California proposes a one-time 5% levy on very large fortunes. It will include startup shares and crypto holdings, even if they sit locked in a long-term bet on your own company.

Founders like Palmer Luckey (Oculus) and Dylan Field (Figma) warn this would force them to sell big chunks of private company stock just to pay the bill. Startup shares are often illiquid, like owning a big slice of a house you cannot sell overnight. If the state demands cash, founders may dump equity or crypto at bad prices, move out, or both.

Yet another stupid bill by @GavinNewsom

The California Billionaire Tax Act: A proposed 5% one-time wealth tax on billionaires' net worth

The reality is that billionares that built Silicon Valley and CA will leave. @Jason @chamath @DavidSacks @friedberg pic.twitter.com/BJaZ1GlQcC

— RedBlueD (@redbluedavid) October 30, 2025

Some already left. Reports say Google cofounder Larry Page shifted several LLCs to Florida, a state with no income tax and a friendlier stance toward high-net-worth residents. This hints at more talent and money flowing away from California and toward places like Florida, Texas, or even overseas hubs such as Dubai and Singapore.

DISCOVER: 10+ Next Crypto to 100X In 2026

How this Tax Fight Reshape US Crypto Jobs?

Taxes and regulation work together like a traffic light for builders: green, yellow, or red. California already passed the Digital Financial Assets Law, which kicks in July 2025 and brings a New York–style license regime for many crypto businesses. New York’s BitLicense pushed big exchanges like Kraken and Bitfinex to leave that state; critics fear California could repeat that story.

Gavin Newsom is progressing a bill to STEAL RESIDENTS CRYPTOCURRENCY (This is real)

“California Assembly Bill 1052 — That bill says that if you don't touch your crypto for 3 years, they can take it. That’s the bill the California legislature just passed — If your crypto, if you… pic.twitter.com/NwgnXH8PbA

— Wall Street Apes (@WallStreetApes) August 28, 2025

When states add heavy licensing plus wealth taxes, founders read the message as, “We don’t really want you here.” If enough builders leave, you see fewer local crypto jobs, fewer meetups, and less lobbying power for user-friendly rules. That filters down to regular users as slower support, limited tokens, or no access at all if an exchange decides your state is not worth the headache.

On the other hand, strict rules might push the remaining companies to run cleaner books and tighter compliance. You see that in enforcement stories like our coverage of Bitcoin privacy crackdowns and FTX executive bans. Cleaner markets help protect us from the wildest scams, but they also raise the barrier for new startups that want to compete.

What Should We Do Now?

If you live in California and hold crypto, this story mainly matters if you fit the wealth brackets lawmakers target or if you work in tech or Web3. Talk to a tax professional before you make big moves; do not smash the “sell” button based on headlines alone. Rules may change before 2026, and lawmakers often adjust details once they see pushback.

If you live outside California, watch this as a preview of how local rules can shape your crypto experience. States and countries compete for talent, and crypto companies go where the rules and taxes feel fair. When you choose an exchange or DeFi platform, check where the company sits and how friendly that place is to crypto as regulation in its home base will hit you through listing decisions, KYC demands, and which services stay available.

Most important: keep your risk in your control. Hold your long-term funds in secure wallets, not on random platforms that might leave a strict state overnight.

Lawmakers, billionaires, and regulators will keep arguing, but you protect yourself by staying informed and treating regulation news as a reason to review your setup. Never panic-sell your stack.

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