Legal Challenge to US Treasury Sanctions on Tornado Cash

Overview of the Legal Challenge

Coinbase's Chief Legal Officer, Paul Grewal, has highlighted a significant legal challenge against the US Treasury's sanctions on Tornado Cash. The plaintiffs argue that these sanctions represent an attempt to ban open-source software, with implications for First Amendment rights.

Key Arguments Against Sanctions

The challenge raises four primary points. The first argument questions the legal premise that anyone holding the TORN token is part of a legally-recognized entity known as "Tornado Cash." This approach is criticized as both novel and factually incorrect.

The second point contends that sanctions should only target "property." Grewal emphasizes that open-source smart contracts, integral to Tornado Cash, do not fit the legal definition of property since they cannot be owned, controlled, or altered by any individual.

Property Interests and Smart Contracts

The third argument underscores that neither the founders, developers, nor users holding TORN tokens have a property interest in these immutable smart contracts. This challenges the basis on which the sanctions were imposed.

First Amendment Concerns

The final argument highlights that the sanctions infringe upon First Amendment rights by burdening free speech. Plaintiffs used the software to safeguard their privacy while participating in constitutionally protected activities, such as making significant donations.

Grewal stresses that the First Amendment offers robust protection, and the government's suggestion that individuals should exercise their rights elsewhere lacks sufficient personal protections.

Conclusion

Grewal concludes that the plaintiffs are not seeking special treatment for cryptocurrencies but are merely advocating for the government to adhere to basic legal standards set by Congress. They also seek access to privacy tools that facilitate legal transactions and donations, reinforcing the importance of upholding constitutional rights in the digital era.