Tornado Cash Sanctions Stay Despite Court Ruling Against OFAC

Key Takeaways

• A Fifth Circuit court overturned OFAC sanctions on Tornado Cash in November 2024.
• The DoJ demanded a 60-day grace period before the district court could implement the appeals court ruling.
• The DoJ has until March 17 to appeal the ruling. 

In November 2024, the Fifth Circuit Court of Appeals ruled that the Office of Foreign Assets Control (OFAC) lacked the authority to sanction Tornado Cash’s privacy tool.

The decision was a major victory for the plaintiffs—backed by Coinbase—who challenged the Treasury Department’s power to blacklist open-source software.

However, three months after the ruling, the crypto mixer remains blacklisted, effectively barring U.S. users from accessing its services.

DoJ’s Appeal Deadline Nears

While the ruling was a victory for Tornado Cash supporters, the sanctions remain in place for now because the Department of Justice (DoJ) requested a 60-day delay before the district court could enforce the ruling.

That period ends on March 17, when the DoJ must either appeal or allow the district court to proceed with lifting the restrictions.

Coinbase’s chief legal officer Paul Grewal called the delay “frustrating,” arguing that the government should not be able to enforce sanctions the courts have ruled unlawful.

Privacy advocates argue that tools like Tornado Cash provide legitimate financial privacy, but regulators view them as a national security risk due to their use in money laundering and illicit finance.

The Lazarus Group and other hacking organizations have used Tornado Cash to launder billions in stolen crypto, leading to the initial OFAC sanctions. However, in recent months, cybercriminals have started avoiding high-profile mixers to prevent detection.

What Happens Next?

With Joe Biden’s administration out and Donald Trump back in office, there is growing speculation about whether the DoJ will pursue an appeal.

If the department files an appeal before March 17, the case could be prolonged, keeping the sanctions in place. If it declines to appeal, the district court could rule on whether the decision applies only to the plaintiffs or grants broader relief, allowing anyone in the U.S. to use Tornado Cash.

The Trump administration has signaled a more crypto-friendly stance, making it unlikely that the government will aggressively fight to keep Tornado Cash under sanctions.

However, until a final decision is made, legal experts caution against using the mixer, as centralized exchanges and financial institutions may still flag such transactions as suspicious.

Peter Van Valkenburgh, executive director of CoinCenter, noted that the court’s decision does not automatically mean Tornado Cash is fully legal.

“The District Court will still need to decide whether the remedy is nationwide vacatur (anyone in the US can use immutable contracts) or more limited relief (plaintiffs can use contracts, and other parties may need to bring their own suits). Nationwide vacatur is what we should be rooting for, “he explained.

For now, Tornado Cash remains in legal limbo. Even if courts ultimately side with the crypto industry, traders using the platform could still face compliance risks until a definitive ruling is issued.