A Texas federal court has recently made a significant ruling against the U.S. Treasury, stating that its sanctions on Tornado Cash ($TORN), a privacy-focused protocol based on Ethereum, were beyond its authority. This ruling is seen as more than just a legal victory; it’s a critical moment for supporters of decentralized finance (DeFi) and the principles of open-source development.

The Case Against Tornado Cash Sanctions

The sanctions from OFAC in 2022 were aimed not only at certain behaviors but also at attempting to censor the very code behind Tornado Cash. The Treasury had claimed that this software enabled money laundering, whereas users argued that it functions just like a door lock—providing privacy and security.

In its ruling, the court emphasized that smart contracts are to be viewed as code and not as criminal entities. Judge John Smith commented,

“The government lacks the authority to penalize self-operating software. Tornado Cash does not have the capability for ownership or control, making OFAC’s actions unlawful.”

This ruling permits Tornado Cash to operate without the threat of sanctions on its code in the future, albeit the legal challenges surrounding its developers continue. Developers Roman Storm and Roman Semenov still face indictments from the Department of Justice, indicating that while the software may be free to use, its creators may still face legal repercussions.

Interestingly, Alex Pertsev, the founder of Tornado Cash, was imprisoned in 2024 but was released recently in February 2025.

TORN: Remaining Legal Challenges

A leaked memo from the Justice Department following the ruling suggested a shift in approach regarding the prosecution of cryptocurrency platforms, especially in cases where illicit behavior occurs. This development may help foster a more supportive environment for developers working in the decentralized space. Despite differing opinions on the necessity of government intervention, it is crucial for DeFi builders to keep pushing towards innovation and improvement in the blockchain landscape.

---

Key Takeaways:

• A Texas federal court has ruled that the U.S. Treasury exceeded its jurisdiction in sanctioning Tornado Cash ($TORN).
• For advocates of decentralized finance and open-source development, this outcome serves as a reaffirmation of their stance against government overreach.
• The ruling’s implications regarding government intervention in decentralized tools continue to spark debate.