Tornado Cash Sanctions Lifted: TORN Token Price Explodes 140%

In a major victory for cryptocurrency privacy advocates, a U.S. District Court has overturned a previous ruling that upheld sanctions against Tornado Cash, a crypto mixing service. The decision, which sent the platform's native token TORN soaring by 140%, hinges on the unique nature of Tornado Cash's immutable smart contracts and their definition under U.S. law.

The Legal Battle: Defining "Property" in the Age of Smart Contracts

The legal battle began in August 2022 when the Office of Foreign Assets Control (OFAC) designated Tornado Cash a sanctioned entity, citing its use by North Korea to launder stolen cryptocurrencies. This led to the sentencing of Tornado Cash developer Alexey Pertsev to over five years in prison for money laundering.

Following the sanction, six plaintiffs, led by Joseph Van Loon, sued the Treasury Department, arguing that OFAC had overstepped its authority under the International Emergency Economic Powers Act (IEEPA). The IEEPA allows the President to block "property" linked to foreign entities, but the plaintiffs argued that Tornado Cash, as immutable software, didn't fit this definition.

Immutable Smart Contracts: A Legal Gray Area

An Appeals Court agreed, ruling in November that Tornado Cash's immutable smart contracts are an exception to the IEEPA's definition of "property." The court emphasized that these contracts, unlike mutable ones, cannot be altered or controlled by their developers, making them inaccessible to anyone, including sanctioned entities.

The court further clarified that even with OFAC sanctions, Tornado Cash's immutable smart contracts remain accessible to anyone with an internet connection, thus making it not "ownable" in the traditional sense. The court also rejected the argument that immutable smart contracts constitute actual contracts requiring an agreement between parties, stating, "Immutable smart contracts have only one party in play." It also dismissed the Treasury Department's claim that Tornado Cash qualified as a service, given its lack of human intervention in execution.

"IEEPA grants the President broad powers to regulate a variety of economic transactions, but its language is not limitless," the court filing stated. "Mending a statute's blind spots or smoothing its disruptive effects falls outside our lane."