Key Takeaways:
- A U.S. appeals court ruled that OFAC exceeded its authority by sanctioning Tornado Cash’s immutable smart contracts, as these do not qualify as “property” under federal law.
- The decision partially reverses previous rulings, emphasizing that immutable, admin-free smart contracts are outside OFAC’s discretion under IEEPA.
- Tornado Cash’s native token, TORN, surged nearly 900% following the ruling, hitting a two-year high of $34.98.
Tornado Cash users secured a significant legal victory as the U.S. Fifth Circuit Appeals Court ruled on November 26 that the Treasury Department’s Office of Foreign Assets Control (OFAC) overstepped its authority in sanctioning Tornado Cash’s immutable smart contracts.
The court determined that these smart contracts—self-executing lines of privacy-focused software code—are not property under the International Emergency Economic Powers Act (IEEPA) because they cannot be owned or controlled.
1/ Today, the U.S. Court of Appeals for the Fifth Circuit ruled in the Tornado Cash case brought by users of the software (Van Loon v. Treasury), finding “immutable smart contracts (lines of privacy-enabling software code) are not the ‘property’ of a foreign national or entity.” https://t.co/G0vkoYzt8O
— Blockchain Association (@BlockchainAssn) November 27, 2024
This ruling reversed an earlier federal court decision and granted Tornado Cash users partial summary judgment.
The case arose from OFAC’s August 2022 sanctions against Tornado Cash, accusing the platform of enabling over $7 billion in cryptocurrency laundering.
OFAC had added 44 Tornado Cash smart contracts to the Specially Designated Nationals (SDN) list.
JUST IN: 🇺🇸 US court rules sanctions placed against Tornado Cash crypto mixer were unlawful.
— Watcher.Guru (@WatcherGuru) November 26, 2024
Six users, supported by Coinbase, sued, arguing the sanctions violated federal law.
Advocacy group Coin Center filed a parallel lawsuit.
Although the ruling removes these smart contracts from the sanctions list, legal experts noted that Tornado Cash as a whole remains subject to potential regulatory scrutiny.
Following the decision, Tornado Cash’s native token, TORN, surged nearly 900%, reflecting investor optimism.
Coinbase’s Chief Legal Officer celebrated the outcome, emphasizing renewed legality for U.S. users to access the protocol.
About The Author
Adam Morris, the co-founder of Crypto Head and a respected crypto expert, offers insightful commentary and analysis on cryptocurrency, NFTs, and the evolving digital landscape.
His extensive experience and features in top-tier publications like Forbes and CNN underscore his deep understanding of the crypto world and its future potential.
Check Adam out on: