While most U.S. traders were refreshing their Fireworks Day meme bags, something a lot more consequential quietly slipped through the legal noise on July 3.
Here's What Actually Happened
The Eleventh Circuit Court of Appeals—yep, the same circuit that oversees Florida—vacated (read: wiped off the board) the Northern District of Florida’s 2023 order that had green-lit the Treasury’s sanctions on Tornado Cash. In the very same breath, the appellate court told the lower court: “Hey, you know that whole Coin Center v. Yellen thing? Yeah, just dismiss it.” One page. Boom. Game over for that particular lawsuit.
For context, this was basically the last active federal case challenging OFAC’s notorious August 2022 designation of Tornado Cash smart contracts. Texas plaintiffs—backed by Coinbase—already struck out in the Fifth Circuit earlier this year, so Florida was the only board left to flip. Now the board is gone.
Wait, Does This Mean Tornado Cash Is Suddenly Legal Again?
I’d love to tell you yes, because who doesn’t want easier privacy rails on Ethereum? But that’s not exactly how vacatur works. The court didn’t bless Tornado Cash. It simply said, “This case shouldn’t move forward, so our prior ruling that sided with Treasury? Pretend it never happened.”
Think of it like hitting “undo” on a Google Doc because the paragraph didn’t belong there in the first place—it doesn’t automatically approve the new paragraph you’re typing. OFAC’s designation itself is still standing. Nobody at Treasury is shredding that PDF just yet.
The Procedural Rabbit Hole (I Promise This Is Quick)
Coin Center and friends originally argued that sanctioning open-source code—especially code that lives on a decentralized network—oversteps OFAC’s statutory authority. The district court disagreed last year, but the appellate judges didn’t even get to substantive arguments. They appear to have tossed the whole thing due to standing or mootness (we’ll know when the fuller opinion drops). Translation: “Guys, you didn’t prove you were the right people hurt badly enough to sue.”
Why This Matters for Your Portfolio
Alright, maybe you’re a DYDX degen who never touched Tornado Cash. Still, privacy tool viability directly impacts Ethereum’s regulatory risk, and that flows into everything from staking yields to Layer-2 TVL.
- ETH traded at roughly $3,365 when the news flashed across my Feedly, basically flat on the day after a mild Monday dump. The market yawned, but I’d keep an eye on DefiLlama’s scrappy Tornado TVL chart (currently ~$191k, down from $3B pre-sanctions!) for any revival blips.
- Chainalysis’s “sanctions” wallet labels still flag every address tied to Tornado. Centralized exchanges aren’t likely to reopen deposits any time soon, so don’t expect sudden liquidity.
- Developers might feel emboldened to fork privacy mixers again—Aztec Labs is already prepping Noir-based shielding. If GitHub coughs up fewer DMCA fears, privacy dev velocity could spike.
Now Here's the Interesting Part
The ruling lands smack in the middle of a broader privacy tug-of-war. Samourai Wallet devs got arrested in April. Monero is delisting from more exchanges faster than you can say “atomic swaps.” Yet Europe’s new MiCA framework kind of accepts self-custody mixers under certain reporting thresholds. It feels like regulators globally still haven’t decided whether crypto privacy is a bug or a feature.
Ironically, the DOJ’s own indictment admitted Tornado Cash has plenty of legitimate uses—think activists in authoritarian regimes, fintech treasury rebalancing, or, my favorite, whales avoiding front-running. No one (well, except Lazarus Group) loves North Korean hackers washing loot, but sanctioning immutable smart contracts always smelled like using a sledgehammer on a mosquito.
So, What Happens Next?
“The ball is now squarely back in Treasury’s court,” Morgan Gray, policy counsel at Coin Center, told me in a quick X DM. “Either fix the rule or face new litigation.”
Translation: Privacy advocates aren’t done. They can file a fresh complaint with different plaintiffs who (hopefully) clear the standing hurdle. They could also zero in on OFAC’s process, arguing it violated the Administrative Procedure Act. The playbook’s still being written.
I’m also half-expecting Congress to dust off that long-stalled “Crypto-Asset National Security Enhancement” (CANSEE) bill. Lawmakers love using headlines like “court overturns terror finance ruling” as political jet fuel heading into an election year.
Your Take-Home TL;DR
1) The Eleventh Circuit basically told the Florida district court, “nah, throw it out.” 2) OFAC’s ban isn’t dead; it’s just less judicially blessed. 3) The fight for on-chain privacy is nowhere near finished, and devs might use this respite to push new zero-knowledge tooling.
I’m not entirely sure where this leaves everyday users who still have ETH stuck in limbo because they once used Tornado. Compliance desks are notoriously risk-averse, so I doubt Coinbase or Binance will suddenly approve withdrawals from tainted addresses. But if another lawsuit lands—and this time nails standing—2025 could be the year we finally get a merits-based ruling on whether code is still speech in the age of smart contracts.
Looking Down the Road
Summer narrative for me? Keep refreshing PACER dockets and GitHub commits. If you see more privacy-centric DeFi projects make noise—say, Penumbra, Railgun, or Aztec—don’t ignore them. Regulators just got reminded that legal battles over code aren’t a one-and-done affair.
Until then, stay cautious when moving funds through anything remotely resembling a mixer. Nobody wants that “your transaction is blocked” email from their favorite centralized off-ramp. But also—cherish every small win for permissionless tech. They’re the breadcrumbs that lead us toward a saner, more nuanced policy future.
