A U.S. appeals court has ruled that the Treasury Department’s Office of Foreign Assets Control (OFAC) exceeded its authority by sanctioning Tornado Cash’s immutable smart contracts. This decision overturns earlier actions taken by OFAC and removes Tornado Cash’s smart contracts from the sanctions list, allowing U.S. citizens to resume their use of the protocol.

US Court Rules Tornado Cash Smart Contracts Not Property

On November 26, the Fifth Circuit Court of Appeals delivered a key ruling on the legality of sanctions imposed on Tornado Cash by OFAC. The court found that the sanctions were unlawful because Tornado Cash’s smart contracts, as immutable open-source code, cannot be owned or controlled by any entity or individual.

“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,” the three-judge panel stated in its decision. The court explained that under the International Emergency Economic Powers Act (IEEPA), OFAC is only authorized to sanction property owned or controlled by foreign persons, which does not apply to the autonomous smart contracts.

The court directed a Texas district court to grant a motion for partial summary judgment filed by the plaintiffs, led by Joseph Van Loon, challenging the sanctions.

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