Privacy WIN!
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Summaries about the legal analysis,
ca5.uscourts.gov/opinions/pu…
The International Emergency Economic Powers Act and the North Korea Sanctions and Policy Enhancement Act vest the President with the authority to regulate “property” in which a foreign “national” or “person” has an “interest.”
The court must determine if Tornado Cash and its smart contracts fall within this definition.
Analysis of “Property” Definition: The court starts with the statutory text and the ordinary meaning of “property,” which is something capable of being owned. The dictionary definitions and the Supreme Court's interpretation support this understanding. The immutable smart contracts at issue are not property because they are not capable of being owned. More than one thousand volunteers participated in a “trusted setup ceremony” to make the code unchangeable and uncontrollable, so no one can exclude others from using the contracts. Even with the sanctions, the contracts continue to operate, and some users may become liable when digital assets are transferred to them via Tornado Cash without their knowledge or consent.
OFAC's Regulatory Definition: The court also considers OFAC's regulatory definition of “property,” which includes “contracts of any nature” and “services of any nature.” However, the court finds that even under OFAC's definition, the immutable smart contracts do not qualify as property. They are not ownable, not contracts (as they lack an agreement between two or more parties), and not services (as they are merely tools used in providing a service and Tornado Cash does not own the services). The court rejects the Department's attempt to conflate “interest” with “property” and emphasizes that the catch-all for “any other property” still requires the item to be property.
Conclusion: The court holds that OFAC exceeded its statutory authority in designating Tornado Cash. The immutable smart contracts are not “property” under the common or regulatory definitions, so the court need not address whether Tornado Cash qualifies as an “entity” or has an “interest” in the contracts. The court reverses and remands the case to the district court with instructions to grant Van Loon's partial motion for summary judgment based on the Administrative Procedure Act.