Tornado Cash Sanctions Ruled Unlawful by U.S. Court

Tornado Cash users scored a major win when a U.S. court ruled that the Treasury went too far in sanctioning its smart contracts.

The Fifth Circuit Court of Appeals decided on Nov. 26 that these smart contracts—automated code that runs independently—aren’t “property” under U.S. law. This means they can’t be blocked under the International Emergency Economic Powers Act (IEEPA).

OFAC, a branch of the Treasury, had sanctioned Tornado Cash in 2022, accusing it of laundering $7 billion in crypto. It added 44 smart contracts to its sanctions list, prompting six users, supported by Coinbase, to file a lawsuit challenging the decision.

The court’s ruling only applies to the smart contracts, leaving other parts of Tornado Cash open to future legal action.

Paul Grewal from Coinbase celebrated the decision, saying U.S. users can now use Tornado Cash’s privacy tools legally again.

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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