Tornado Cash Users Win Major Victory as Appeals Court Reverses Sanctions on Immutable Smart Contracts

In a Nov. 26 legal opinion, a Fifth Circuit Appeals Court's three-judge panel said the Office of Foreign Assets Control (OFAC) exceeded its authority

A United States appeals court has ruled that the Treasury’s sanctions against crypto mixer Tornado Cash’s immutable smart contracts were unlawful.

In a Nov. 26 legal opinion, a Fifth Circuit Appeals Court’s three-judge panel said the Office of Foreign Assets Control (OFAC) exceeded its authority in sanctioning Tornado Cash’s immutable smart contracts — reversing a lower court’s decision and granting the platform’s users a partial summary judgment.

The appeals court panel said that while the Treasury has the power to take action against “property,” Tornado Cash’s immutable smart contracts were not property under the International Emergency Economic Powers Act (IEEPA) as they can not be controlled or owned.

“We hold that Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the “property” of a foreign national or entity, meaning (1) they cannot be blocked under IEEPA, and (2) OFAC overstepped its congressionally defined authority,” the trio of judges wrote.

The IEEPA is a United States federal law enacted in 1977, giving the President authority to regulate and prohibit certain financial transactions.

“In sum, they cannot be blocked under federal law,” Bill Hughes, a lawyer at Consensys, summarized on X. “They certainly can’t be blocked as an exercise of OFAC’s discretion.”

However, Hughes noted that this does not mean Tornado Cash is in the clear.

“This does NOT mean that the rest of Tornado Cash is out of bounds for Treasury/OF