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A recent ruling by a US judge stated that Tornado Cash had legal status as a “person”. This development follows the previous ruling in June, which recognized the decentralized autonomous organization Ooki DAO in the same way.
US Justice Designates Tornado Cash as ‘Person’ in OFAC Case
In legal battles with the US government, specifically OFAC, the plaintiffs argued that Tornado Cash was simply a decentralized software. Instead, the government sees it as an organization that facilitates cryptocurrency mixing. Central to the dispute is whether OFAC holds the power to impose sanctions on Tornado Cash, and whether such action violates plaintiffs’ free speech.
However, the court rejected the plaintiffs’ stance, recognizing Tornado Cash as a suitable entity for OFAC designation. The court reasoned that Tornado Cash was in line with the regulations’ description of “association”, given the collaborative efforts of its founders, developers, and DAO governance model towards a common goal. US Judge Robert Pitman stated:
The record sufficiently supports OFAC’s determination that Tornado Cash’s founders, developers, and DAO have acted together to promote and regulate Tornado Cash and to profit from this activity.
Additionally, Judge Pitman identified that Tornado Cash has an interest in the smart contracts it creates, which is in line with the regulatory classification of “property”. These contracts, which independently generate revenue as a fee for Tornado Cash, are a real benefit. Pitman explains this perspective in court documents.
When it comes to the First Amendment issue, Pitman clarified that the government’s move does not violate protected speech. Such designation solely limits transactions related to the Tornado Cash property rights, without limiting involvement with open source code or other services.
Pitman’s assessment emphasized, “The fact that smart contracts do so without additional human intervention, such as vending machines, or are immutable, does not affect their status as a [a] type of contract and, thus, type of property in a regulatory sense.”
The court documents also reveal that the plaintiffs’ Fifth Amendment claims were essentially set aside, given the lack of follow-up beyond the initial complaint, even when the government requested a summary decision for all claims. In conclusion, judge Pitman dismissed plaintiffs’ request for a summary decision while supporting the government’s counterclaim.
He said he firmly believed that OFAC acted within its legal limits in its decision regarding Tornado Cash, ensuring there was no violation of plaintiffs’ constitutional rights. The ruling on Tornado Cash mirrors an earlier lawsuit involving Ooki DAO, which was initiated by the US Commodity Futures Trading Commission (CFTC).
On June 9, 2023, the CFTC won when a judge ruled that DAO Ooki qualifies as a “person” under the Commodity Exchange Act. “This decision should serve as a warning to anyone who believes they can circumvent the law by adopting a DAO structure,” said CFTC Enforcement Division director Ian McGinley at the time.
What do you think of the judge’s decision regarding Tornado Cash being classified as a person? Share your thoughts and opinions on this subject in the comments section below.
Source: Bitcoin.com
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