Tornado Cash users celebrated a significant legal victory after a U.S. appeals court ruled against Treasury sanctions targeting the crypto mixer’s immutable smart contracts. On Nov. 26, the Fifth Circuit Appeals Court overturned a previous decision, declaring the Office of Foreign Assets Control (OFAC) had overstepped its authority.

The court found that Tornado Cash’s immutable smart contracts, essentially self-executing privacy software, did not qualify as "property" under the International Emergency Economic Powers Act (IEEPA). According to the judges, these contracts, which operate without control or ownership, cannot be blocked under federal law. The ruling directly challenges OFAC’s actions, which added 44 Tornado Cash smart contracts to the Specially Designated Nationals (SDN) list in 2022.

“This decision reinforces that the Treasury cannot designate smart contracts as property simply because they facilitate transactions,” commented Bill Hughes, a Consensys attorney, on social media. However, Hughes warned that this ruling doesn't clear Tornado Cash entirely, as other aspects of the platform may still face scrutiny.

The sanctions, imposed in August 2022, accused Tornado Cash of enabling over $7 billion in crypto laundering since 2019. The Treasury’s move sparked immediate backlash, with six Tornado Cash users, backed by Coinbase, filing a lawsuit challenging the sanctions. Crypto advocacy group Coin Center also launched its own legal battle.

The latest ruling mandates the removal of these smart contracts from the sanctions list, allowing U.S. citizens to resume using the platform. Coinbase’s chief legal officer, Paul Grewal, hailed the decision as a win for privacy and decentralization. Still, this case underscores the ongoing tug-of-war between blockchain innovation and regulatory oversight.