Court Reverses Tornado Cash Sanctions — What’s Next for XRP Lawsuit?

A U.S. appeals court recently overturned sanctions on Tornado Cash, a cryptocurrency mixer. The decision challenges the U.S. Department of the Treasury's authority to block decentralized services. This ruling could have far-reaching effects, not only for Tornado Cash but also for the ongoing SEC lawsuit against Ripple.

Court Rules Against Treasury's Authority

Tornado Cash was sanctioned by the Treasury’s Office of Foreign Assets Control (OFAC) in August 2022. OFAC claimed Tornado Cash helped with money laundering and supported North Korea’s nuclear program. 

However, the court disagreed, ruling that Tornado Cash’s smart contracts don’t count as “property” under the law. The court stated that decentralized, immutable contracts aren’t owned by any individual or organization, so they can’t be blocked under U.S. sanctions.

The decision had an immediate impact. Tornado Cash's native token, TORN, surged by 436% in 24 hours. This major ruling replaces an earlier district court decision, raising questions about how courts will approach similar cases in the future.

Ripple’s Lawsuit and the Broader Implications

Ripple’s legal team, led by Chief Legal Officer Stuart Alderoty, has drawn parallels between this case and the ongoing SEC lawsuit. Alderoty pointed out that both rulings highlight a key principle: regulators must stick to the laws written by Congress. 

The SEC’s case against Ripple accuses the company of violating securities laws by selling XRP tokens. The new precedent set by the Tornado Cash ruling could influence the Ripple case. Courts are pushing back against regulatory overreach.

Ripple CEO Brad Garlinghouse has often criticized SEC Chair Gary Gensler and the commission’s approach to crypto regulation. Garlinghouse hopes that, regardless of the 2024 elections, the industry will see more supportive conditions.