Tornado Cash Faces Lifting of Imposed Penalties by Court Decision
In a significant ruling, the U.S. Fifth Circuit Court of Appeals has overturned the sanctions imposed by the Office of Foreign Assets Control (OFAC) against the cryptocurrency mixer Tornado Cash. The decision, announced on January 21, 2022, marked a turning point in the legal battle surrounding Tornado Cash, a service that had been accused of facilitating money laundering.
The sanctions, initially imposed in August 2022, had prohibited U.S. persons from interacting with Tornado Cash. However, a series of legal challenges followed, with cryptocurrency advocacy group Coin Center and others filing lawsuits contesting the sanctions' legal authority and scope.
The key ruling in the case came in November 2024, when the U.S. Court of Appeals for the Fifth Circuit (Van Loon v. Treasury) found that immutable smart contract code, such as that used by Tornado Cash, cannot be sanctioned as it is not considered "property". Consequently, OFAC delisted Tornado Cash from the sanctions list in March 2025.
The legal dispute did not end there, as the Eleventh Circuit was considering Coin Center’s challenge. However, after OFAC lifted the sanctions and the Fifth Circuit’s ruling became final, both parties agreed the case was moot. On July 3, 2025, the Eleventh Circuit dismissed Coin Center’s appeal, effectively ending the legal dispute over the sanctions authority in this circuit.
Despite the end of sanctions-related litigation, the U.S. government is still pursuing criminal money laundering charges against Tornado Cash developers Roman Storm and Roman Semenov. Storm’s trial is set to begin in June.
In the wake of the ruling, the judge in Roman Storm’s criminal trial has indicated she is inclined to exclude any mention of the now-withdrawn OFAC sanctions during the proceedings, though other elements of the case remain admissible.
The Treasury has signalled its intention to develop more targeted tools rather than rely on broad sanctions of smart contract protocols. This decision has significant implications for the cryptocurrency industry, potentially paving the way for greater clarity in the regulation of decentralised protocols.
As of this writing, TORN, the utility token of Tornado Cash, trades around $25, according to TradingView. The future of Tornado Cash and its developers remains uncertain, as criminal charges continue to be pursued. However, the ruling in favor of Tornado Cash by the U.S. Fifth Circuit Court of Appeals has sparked hopes within the crypto community that it could positively impact the legal cases of those associated with the service.
- The ruling by the U.S. Fifth Circuit Court of Appeals, which found that immutable smart contract code cannot be sanctioned, could have significant implications for the fintech industry, particularly in the regulation of decentralized protocols in finance technology.
- The Treasury's intention to develop more targeted tools for sanctioning rather than relying on broad sanctions of smart contract protocols could potentially bring clarity to the cryptocurrency industry, influencing legal cases involving services like Tornado Cash.
