Tornado Cash: What Van Loon Decided About Property

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

Tornado Cash produced one appellate decision that is quoted constantly and understood rarely. In November 2024 the Fifth Circuit held in Van Loon v. Department of the Treasury that the immutable smart contracts are not property under the sanctions statute. That is a precise statutory holding, and almost every popular summary of it claims more than the court said.

What question was actually before the Fifth Circuit?

The question was statutory and narrow: whether the immutable smart contracts fell within the definition of property that the sanctions statute permits the government to block. It was not whether privacy tools are good policy, whether the underlying activity is lawful, or whether anyone should face criminal charges.

US financial sanctions work by blocking property. The statutory authority lets the executive branch prohibit dealings in property, and in property interests, of a designated party. Everything downstream of a listing depends on there being property to block, which is why a challenge aimed at that word goes to the root of the action rather than to its edges.

The challenge followed Treasury’s 2022 designation announcement, which added the name and a set of associated addresses to the sanctions list. The plaintiffs were users of the pools rather than developers, and their case asked a question of administrative law: did the agency stay within the authority the statute gave it. A challenge of that kind never asks whether the agency was right on policy.

The design of the system is what made the question difficult, and it is worth stating plainly. The pools are Ethereum smart contracts that accept deposits in fixed denominations and release them against a cryptographic proof, and once deployed the core contracts cannot be modified, paused or removed by anyone, including their authors. There is no company behind them, no administrator to serve with an order, and no switch anyone can reach. A sanctions regime built around parties who hold and control assets meets an object with none of those characteristics.

Why are immutable contracts not property on this reasoning?

Because property implies something that can be owned, and ownership implies a power to exclude or dispose. The core pool contracts have no owner, no administrative key, no pause function and no upgrade path. Nobody can transfer them, switch them off or keep anyone else out, so on the court’s reading there is nothing to block.

The government pointed to the regulatory definition of property, which lists many examples including contracts. The court then asked whether an immutable smart contract is a contract in the legal sense, and reasoned that an agreement requires parties who can be bound and terms that can be enforced against them. Self-executing code that runs identically for anyone who calls it has no counterparty in that sense.

It is worth being precise about what kind of argument this is. The court was reading ordinary words in a statute and applying them to an unusual object, not announcing a principle about technology. Nothing in the opinion says code is beyond the reach of government, and the reasoning depends entirely on the particular features of these contracts, above all the absence of any party able to control them.

What does the holding leave untouched?

Almost everything outside the sanctions statute. The ruling says nothing about whether any person acted lawfully, nothing about money transmission or money laundering, nothing about the law of any other country, and nothing about free expression. It also leaves mutable components and identifiable people available for designation on their own facts.

The clearest evidence of that limit is what happened next. Treasury had already designated Roman Semenov, a co-founder, in August 2023, and that action concerned a person rather than a contract. The criminal prosecution of Roman Storm in New York continued through the ruling and past the March 2025 delisting, producing a jury verdict in August 2025 on one count of conspiracy to operate an unlicensed money transmitting business.

Reading a narrow ruling broadly is the most common error in this whole subject. A decision that an agency exceeded a statute is a statement about the agency and the statute. It is not a declaration that the conduct at issue is harmless, and it is not an amnesty for anyone who dealt with the system.

There is also a geographic limit that is easy to forget. A US appellate court construes US law, and the Dutch proceedings against Alexey Pertsev, who was convicted in May 2024 and conditionally released in February 2025 while an appeal remains pending, ran on a separate national legal system with its own definitions and its own record. Nothing the Fifth Circuit said governs that case, and nothing decided in the Netherlands governs the American one.

How can you tell a holding from dicta in an opinion?

You identify the precise question presented, find the disposition, keep only the reasoning necessary to reach it, mark the rest as commentary, and check whether later courts have treated the passage as binding. Dicta can be persuasive and quotable, but it does not decide anything.

Step 1: Locate the question presented

Find the sentence where the court states the precise issue it agreed to decide, because everything that follows is either an answer to that question or an aside. Courts usually place it early and phrase it more narrowly than the parties did.

Step 2: Read the disposition before the reasoning

Skip to the final paragraph that says what the court actually did, such as affirming, reversing or remanding, because the disposition tells you what the opinion changed. A reversal in part is a different animal from a clean reversal.

Step 3: Keep only the reasoning that was necessary

Work backward from the disposition and keep the steps of reasoning without which the result would collapse, since those steps are the holding and the rest is not. Anything the court could have dropped without changing the outcome is not binding.

Step 4: Mark the remaining passages as commentary

Label the observations that were not required by the result, including hypotheticals and policy remarks, as dicta so you do not later quote them as settled law. Quotable sentences are disproportionately likely to be dicta.

Step 5: Check how later courts have used the passage

Look at decisions that cite the opinion to see whether other courts treated a given passage as binding, distinguished it or ignored it entirely. A holding nobody follows is weaker in practice than its text suggests.

Why did the delisting follow if the ruling was so narrow?

A narrow ruling can still be decisive for one list entry. The court held that these specific objects could not be designated under the statute, so the entry could not stand as written. In March 2025 Treasury removed the name from the sanctions list, which settled the listing without settling anything about conduct.

The sequence matters for anyone reading older coverage. Between August 2022 and March 2025 the name was designated, and dealings with the listed addresses were prohibited for US persons. Since March 2025 it has not been designated. Articles written during the earlier window were accurate then and are simply out of date now, which is a different problem from being wrong.

Delisting is also not exoneration, and Treasury retains authority to designate parties that meet the criteria. What changed is one administrative status. Financial institutions continued applying their own risk-based controls to mixer-associated funds afterwards, because those programs are driven by risk assessment rather than by list membership, and the criminal docket in New York was unaffected.

The reach of the decision at a glance

Because the ruling is cited for propositions it never contained, it helps to set out the questions people expect it to answer and note which one it actually did. The table is a summary of scope rather than legal advice, and any specific situation should be taken to qualified counsel.

Question	Did the ruling decide it?
Are the immutable pool contracts property under the statute?	Yes, and the answer was no
May a named individual be designated?	Not addressed at all
Is operating or promoting such a system a crime?	Not addressed, a matter for criminal statutes
Is publishing source code protected expression?	Not reached, no constitutional issue decided
Does foreign law reach the same conclusion?	Outside the court’s authority entirely
Must firms stop flagging mixer-linked funds?	No, risk-based programs run independently

Only the first row is a holding. Every other row is a question the opinion left exactly where it found it, and treating any of them as answered is how a narrow statutory decision gets reported as a broad victory for one side.

Frequently asked questions

Is the ruling binding on courts outside the Fifth Circuit?

A federal appellate decision binds the district courts within its own circuit and is persuasive but not controlling elsewhere. The criminal proceedings in New York sit in a different circuit, so a judge there is free to reason differently on a question the Fifth Circuit answered.

Could Congress change this outcome by amending the statute?

The decision turned on the wording of a statute and its implementing definitions, not on a constitutional limit. A legislature that wanted a different result could in principle write one, which is why the ruling is better understood as a reading of current text than as a permanent boundary.

Did the ruling cover every address associated with the project?

The reasoning was directed at the immutable pool contracts, which have no owner and cannot be altered. Components that do have a controller, and people who can be identified, sit outside that reasoning entirely and are analyzed on their own facts.

Does the reasoning mean nobody owns the assets held in a pool?

No, and the two questions are separate. The court was asking whether the contract itself is an object capable of being owned, not who has a claim to assets sitting inside it. The opinion addressed only the first question.