US appeals court: the OFAC exceeded its authority in sanctioning Tornado Cash's immutable smart contracts, as they aren't property because they cannot be owned
A US appeals court ruled the Treasury's OFAC “overstepped” when it sanctioned crypto mixer Tornado Cash's smart contracts.
CointelegraphFelix Ng
Context & Ripple Effects
Treasury’s 2022 action against Tornado Cash and associated wallets prompted a sustained challenge to the scope of sanctions authority, including Coin Center’s suit against Treasury. A later Coinbase-funded challenge initially failed, underscoring how unsettled the issue remained before this appeal. That earlier loss makes the appellate ruling a meaningful reversal in the litigation arc.
The decision turns on a narrow but consequential distinction: immutable smart contracts that cannot be owned are not “property” for this use of OFAC’s authority. It therefore tests whether conventional sanctions tools map cleanly onto autonomous blockchain software.
First-order effects
OFAC cannot rely on its existing property-based authority to sanction Tornado Cash’s immutable smart contracts on the rationale rejected by the court.
Developers and users of immutable contracts gain a judicially recognized limit on treating autonomous code itself as sanctionable property, while Treasury must distinguish that code from sanctionable people or assets.
Second-order effects
Sanctions enforcement involving decentralized services will require more precise targeting of identifiable actors, wallets, or property rather than a blanket designation of immutable software.
Crypto developers and compliance teams will scrutinize protocol design and control rights more closely, since whether a system can be owned or altered now bears directly on regulatory exposure.
Third-order effects
If courts continue to apply statutory limits this way, the gap between sanctions policy objectives and autonomous software could push Congress or regulators toward more explicit authority tailored to decentralized systems.
The case reinforces a broader division between regulating intermediaries that control transactions and regulating protocols whose code persists without an owner; how that line develops will shape the durability of policy controls in crypto.
The trend: This is part of the broader contest over whether financial-regulation powers built for ownable assets and controllable intermediaries can govern permissionless, immutable software.
The Fifth Circuit has just opined that the smart contracts that comprise the Tornado Cash cryptocurrency tumbler are “not property because they are not capable of being owned”, and thus cannot be sanctioned by OFAC. [images]
Privacy wins. Today the Fifth Circuit held that @USTreasury's sanctions against Tornado Cash smart contracts are unlawful. This is a historic win for crypto and all who cares about defending liberty. @coinbase is proud to have helped lead this important challenge. 1/6
BIG NEWS: Federal appeals court says Treasury overstepped its authority when sanctioning immutable smart contracts deployed by the @TornadoCash devs because they are NOT property of a foreign person or entity. “The immutable smart contracts at issue in this appeal are not [image]
holy shit immutable smart contracts just beat the treasury department in court “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 [im…
No one wants criminals to use crypto protocols, but blocking open source technology entirely because a small portion of users are bad actors is not what Congress authorized. These sanctions stretched Treasury's authority beyond recognition, and the Fifth Circuit agreed. 3/6
The 5th Cir. Court of Appeals ruling in favor of plaintiffs challenging the prior addition of Tornado Cash smart contracts to sanctions list pursuant to IEEPA is tremendous. Incredible win here. Another blow to the admin state acting without updated and direct congressional [imag…
A stunning victory for crypto in the Fifth Circuit 🔥 The court held that immutable smart contract protocols are not “property” subject to sanctions “because they are not capable of being owned” and struck down OFAC's 2022 designation of Tornado Cash. Decentralization wins 🎆
Bullish. We can use code to allow anyone to do anything. We are untouchable. End the FED. End the government. Internet anarchism. No compromises. The cypherpunks are making it happen.
I don't think people understand how big of a ruling this is. The court is saying that immutable smart contracts are not subject to sanctions since they're not owned by anyone. The US legal system is finally acknowledging that decentralized protocols are a new type of
Proud of this outcome. The courts ruled in our favor that @USTreasury cannot sanction open source code. @coinbase will keep holding government accountable to protect your freedoms.
These smart contracts must now be removed from the sanctions list and US persons will once again be allowed to use this privacy-protecting protocol. Put another way, the government's overreach will not stand. 2/6
Today's ruling on Tornado Cash smart contracts being ownerless is big win for crypto. However, their reason on why it is un-ownable is hilariously wrong. 🤦♂️ The (Groth16) trusted setup is not the reason. It's actually setting of ‘operator’ to null that made it un-ownable. [imag…
Our legal theory was just validated in court. The Fifth Circuit Court of Appeals has found that the Tornado Cash smart contract cannot be sanctioned. [image]
Today the 5th Circuit held “Tornado Cash's immutable smart contracts [...] 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.” [image]