District Court officially ordered to reverse sanctions against Tornado Cash.

In November 2024, the U.S. Court of Appeals for the Fifth Circuit issued a precedential opinion in Van Loon v. Department of the Treasury holding that the U.S. Treasury’s Office of Foreign Assets Control (OFAC) exceeded its authority under the International Emergency Economic Powers Act (IEEPA) when it sanctioned Tornado Cash’s immutable smart contracts and treated them as “property” of a sanctionable entity. OFAC’s 2022 designation had added the Tornado Cash website, dozens of smart contract addresses, and related components to the Specially Designated Nationals (SDN) list, effectively barring U.S. persons from interacting with the mixer’s code on the theory that the software and its outputs were “property” in which a foreign person had an interest. The Fifth Circuit rejected that reasoning, concluding that the immutable, self-executing smart contracts are “just software code” that is unownable, uncontrollable, and incapable of being owned—and therefore do not qualify as sanctionable “property” under IEEPA. The appellate court’s ruling vacated the district court’s earlier decision upholding OFAC’s designation and ordered the lower court to grant partial summary judgment in favor of Tornado Cash users and to remand the matter to OFAC, effectively requiring reversal of the sanctions insofar as they depend on classifying the immutable smart contracts as property. In response to the litigation and the court’s reasoning, the Treasury Department has indicated it is removing economic sanctions against Tornado Cash in the case, while emphasizing its continuing money-laundering concerns and its broader authority to target illicit actors using crypto-mixing tools. The decision is a significant precedent for how sanctions law applies to decentralized, open-source protocols, narrowing OFAC’s ability to treat autonomous smart contracts as sanctionable property and signaling that future enforcement in the Web3 space may need to focus more directly on identifiable persons and entities rather than on immutable code alone.

✨ AI-generated background, compiled from web sources — not editorial content.

More coverage

• Fifth Circuit Reverses Tornado Cash Sanctions Ruling - Jones Day (jonesday.com)
• OFAC's Tornado Cash Designation Was Unlawful, US Appeals ... (acams.org)
• OFAC Sanctions Virtual Currency Mixer Tornado Cash - Dechert LLP (dechert.com)
• OFAC Tornado Cash – The Ultimate Guide - Federal Lawyer (federal-lawyer.com)
• Tornado Cash Delisting | U.S. Department of the Treasury (home.treasury.gov)

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