Fifth Circuit Ruled Tornado Cash’s Immutable Contracts Were Not Sanctionable Property

The U.S. Court of Appeals for the Fifth Circuit ruled on November 26, 2024 that Tornado Cash’s immutable pool smart contracts were not “property” that the Treasury Department could block under the International Emergency Economic Powers Act. The three-judge panel reversed a Texas federal court and directed it to grant six Tornado Cash users partial summary judgment under the Administrative Procedure Act.

The decision mattered beyond one Ethereum privacy tool. OFAC had treated autonomous software addresses as sanctionable property associated with an entity. The Fifth Circuit instead drew a statutory boundary around code that, on the record before it, nobody owned, controlled or could alter. That distinction narrowed the executive branch’s existing sanctions authority over decentralized infrastructure while leaving Congress free to change the law.

What the court actually decided

Tornado Cash’s pool contracts accept deposits and permit later withdrawals to different addresses after verifying a cryptographic credential. The court distinguished the immutable pools from mutable components, including a relayer registry and governance contract. Its holding concerned the 20 immutable smart-contract addresses at issue, not every contract, interface, developer, relayer or user associated with Tornado Cash.

The panel reasoned that property must be capable of ownership. Because the pool code could not be changed or switched off even by its creators, no person could exclude others from using it. The court also rejected Treasury’s alternative theories that the immutable contracts were themselves contracts or services. Software could be a tool used to provide a service, the opinion said in substance, without being the service.

That analysis led the court to conclude that OFAC had exceeded the authority Congress supplied through IEEPA. The judgment reversed the district court; it did not amend IEEPA, issue a general constitutional right to transact privately or hold that all decentralized software was beyond sanctions law.

The sanctions and illicit-finance record

OFAC first designated Tornado Cash on August 8, 2022. Treasury said then that the mixer had been used to launder more than $7 billion in virtual currency since its creation in 2019, including more than $455 million stolen by the North Korea-linked Lazarus Group. Those figures were Treasury’s cumulative attributions as of August 8, 2022, not Coinburn calculations or independently audited totals.

The Fifth Circuit expressly recognized the government’s legitimate concern about foreign actors laundering stolen assets. Its answer was institutional: courts could not enlarge statutory language to reach a technology Congress had not placed within the relevant definition of property. The opinion therefore separated the government’s policy objective from the legal mechanism OFAC had chosen.

The distinction was important for wallet providers, exchanges and compliance vendors. If immutable code itself could be blocked as property, interacting with a persistent onchain address could carry sanctions consequences even though no operator had the power to stop the code. If it could not, authorities would need to focus existing powers on identifiable people, entities or property interests—or seek new authority from Congress.

What remained unresolved on November 26

The opinion did not immediately delete Tornado Cash from the Specially Designated Nationals and Blocked Persons List. It reversed and remanded the civil case for further proceedings. It also did not decide the plaintiffs’ First or Fifth Amendment theories; the opinion records that they did not appeal their loss on those grounds.

Separate criminal allegations against Tornado Cash developers were not adjudicated in this civil appeal. Nor did the ruling declare money laundering, sanctions evasion or operating an unlawful financial business permissible. The event-day conclusion was narrower: the 1977 emergency-powers statute did not authorize OFAC to block the immutable smart contracts as property.

Later context

On March 21, 2025, Treasury removed Tornado Cash from the sanctions list after reviewing the legal and policy issues. That later action confirms the eventual administrative outcome, but it was not yet known or effective on November 26, 2024.