Coinbase Tornado Cash: What the Plaintiffs Argued

Prepared by the editorial team. Updated August 31, 2026.

Coinbase Tornado Cash appears as a single search phrase because the exchange funded the lawsuit that challenged the 2022 designation, not because of any product or commercial relationship between the two. The six plaintiffs in Van Loon v. Department of the Treasury, who included Coinbase employees, built their case on the meaning of one statutory word. This article sets out what they argued, why they framed the claim around ownership rather than privacy, and what the court accepted.

What did the six plaintiffs actually claim?

They claimed the agency exceeded the authority Congress had given it. The central assertion was that the immutable pool contracts are not property in which any foreign national holds an interest, so there was nothing the blocking power could lawfully reach. The claim was about the wording of a statute rather than about rights or policy.

United States sanctions of this kind rest on a power to block property and interests in property. That phrasing does a great deal of work: it identifies what the government may freeze and, by implication, what it may not. The plaintiffs accepted that the power exists and that it is broad. Their argument was that it has an object, and that the object has to be something a person can hold an interest in.

The plaintiffs were individuals rather than companies, which matters for how the case could be brought at all. Each said the listing had interfered with their own lawful use of the pools, including funds they had deposited and could no longer deal with. That is the kind of concrete effect a federal court requires before it will hear a challenge to an agency action.

The government’s position was the mirror image. It treated the pools as instrumentalities associated with the wider project and its participants, and argued that the designation was a permissible application of a deliberately wide statute. The dispute therefore came down to whether an unowned, unchangeable piece of deployed code could be characterised the way the statute requires.

Why does the meaning of the word property matter here?

Because the blocking power operates on property and nothing else. If the contracts are not property, no amount of concern about how they are used brings them within the statute. Every other question in the appeal, including the seriousness of the underlying allegations, was downstream of that single definitional issue.

Property in ordinary legal usage implies a set of relationships between a person and a thing: the ability to exclude others, to transfer, to control or to destroy. The pool contracts fit none of these. They have no owner, no administrator key, no pause switch and no upgrade path, so no person can stop them, change them, hand them to anyone or keep anyone else from calling them. They simply execute for whoever sends a valid transaction.

The Fifth Circuit’s answer on November 26, 2024 followed from that description. Reading the statutory term in its ordinary sense, the court concluded that immutable smart contracts are not property capable of being blocked and could not be designated. The reasoning does not turn on cryptography, on privacy, or on any judgment about the merits of financial anonymity.

Why was privacy not the centre of the argument?

Because a privacy claim would have asked the court to weigh constitutional interests against a national security judgment, a contest challengers usually lose. A definitional question about a statutory term is narrower, courts resolve such questions routinely, and the answer does not depend on a judge’s view of financial privacy or of cryptocurrency generally.

Courts also prefer statutory grounds by convention. Where a case can be resolved by reading a statute, judges will normally do that rather than reach a constitutional question, so a claim framed as a matter of definition has a better chance of being addressed at all. Framing follows that incentive, and litigants shape their strongest argument around the question a court is most willing to answer.

The framing has a cost, which is that the win says less. A ruling that the government relied on the wrong power leaves every other power intact. Had the case been decided on a privacy theory it would have reached further into questions about surveillance and financial autonomy, but it would also have been much harder to win and far easier to distinguish later.

How can you check what a court opinion holds before citing it?

You read the question presented and the disposition, locate the sentence that resolves the case, separate the reasoning the result depends on from surrounding discussion, note the court and the later history, and find the passages where the opinion says what it is not deciding. The procedure is research only and is not legal advice.

Step 1: Read the question presented and the disposition

Start with the opening statement of the issue and the final line of the judgment, because together they tell you what the court was asked and what it ordered. Those two points bracket the decision, and a claim about the case that falls outside them is almost always an overstatement.

Step 2: Locate the sentence that resolves the case

Find the sentence in which the court states its conclusion on the decisive issue, since that sentence is the holding and everything else in the opinion supports, qualifies or surrounds it. In a well-written opinion it is usually short, flat and easy to miss precisely because it makes no rhetorical effort.

Step 3: Separate necessary reasoning from surrounding discussion

Ask of each passage whether the result would change if that passage were deleted, because reasoning the outcome does not depend on carries much less weight in later cases. Quotable asides are the most commonly cited parts of famous opinions and the least binding.

Step 4: Note the court, the date and the later history

Record which court decided the case, when, and whether the decision was reviewed, superseded or overtaken by a change in the underlying rule, because an accurate quotation from a stale opinion is still misleading. A decision from one federal circuit also does not automatically govern another.

Step 5: Look for what the opinion says it is not deciding

Search the text for the passages in which the court expressly reserves or declines a question, because those lines are the clearest available statement of the limits of the decision. They are frequently the sentences that secondary coverage leaves out.

What did the court decline to accept?

It did not hold that using a mixer is lawful, did not decide whether anyone had committed an offence, and did not rule on every component associated with the project. It resolved one statutory question about one category of contracts and expressly left the rest of the landscape where it found it.

The distinction between a limit on an agency and a licence for conduct is the part most often lost. Criminal statutes on money laundering, unlicensed money transmission and sanctions evasion operate independently of any list, and a ruling about what may be designated does not touch them. The prosecution of Roman Storm in New York proceeded after the decision, producing a conviction on one count in August 2025, a jury deadlock on two others and a retrial now scheduled for April 26, 2027.

The agency response was a separate act. Treasury removed the name from the sanctions list in March 2025, which changed the operative list rather than the reasoning behind it, and the original 2022 action notice remains the primary record of what was designated in the first place. Reading both documents is the quickest way to see how much narrower the legal question was than the coverage suggested.

Each argument and how it fared

The claims in the case can be laid out against what the record shows happened to each one. The table is a summary for orientation and not a substitute for the opinion itself, which states its own scope more precisely than any table can.

Argument advanced	What the record shows
The immutable pool contracts are not property under the statute	Accepted by the Fifth Circuit in November 2024
Nobody owns, controls or can alter those contracts	Accepted as the factual basis for the property conclusion
The designation could not stand as to those contracts	Accepted, and the listing was later removed by the agency
Using a mixing service is lawful conduct	Not decided; the court did not address the question
The government misjudged the risk the tool posed	Not decided; factual assertions in the designation were not resolved

The pattern is that the accepted claims are definitional and the unaddressed ones are evaluative. That division is what makes the outcome easy to over-read: a narrow technical win on the meaning of a term reads, in summary, like a broad vindication.

Frequently asked questions

Why is the case called Van Loon rather than something about the mixer?

Federal cases are captioned by the parties rather than by the subject matter, and the short name comes from the first-listed plaintiff. That is why coverage of the same dispute alternates between the case name and a description of the underlying facts, which sometimes makes one dispute look like two.

Did the ruling force Treasury to remove the name from the list?

The two events are related but not the same act. The court decided a legal question about specific contracts in November 2024, and the agency removed the name from the Specially Designated Nationals list in March 2025, which was a separate administrative action taken later.

Does the same reasoning cover every smart contract?

No, because the reasoning depends on facts about a particular contract. A contract with an administrator key, an upgrade path or a pause function has someone who can control it, which places it in a very different position from the immutable pools the court was examining.

Were the plaintiffs accused of anything themselves?

The case was a civil challenge to an agency action, not a prosecution, so no allegations against the plaintiffs were at issue. They appeared as people who said the designation had affected their own lawful use of the pools, which is what gave them a basis to sue.