Coinbase Lawyer Optimistic About Legal Challenge to US Tornado Cash Ban As Lawsuit Enters Critical Stretch

The head lawyer at Coinbase says “powerful” legal arguments are being presented at a key point in the action to reverse a US prohibition on Tornado Cash. Paul Grewal, chief legal officer of top US exchange Coinbase, tells his 30,100 Twitter followers that he believes plaintiffs will succeed in their action against the US Treasury Department to lift the prohibition on using the crypto mixer.

Grewal is responding to a summary decision made in U.S. District Court in Texas on Wednesday. “A few months ago, Coinbase supported a court appeal to US government penalties placed against Tornado Cash. The plaintiffs filed a move for summary judgment today, requesting that the court reopen [Tornado Cash] for everyone. Their ideas are straightforward yet effective.”

Coinbase is supporting the case, which was first launched in September 2022 after the United States Treasury Department listed the crypto mixer to the Specifically Designated Nationals and Blocked Persons (SDN) list, making its use illegal. The plaintiffs contend that the designation exceeds the agency’s lawful jurisdiction and violates free expression under the First Amendment to the United States Constitution.

Grewal says, “As a starting point, whenever we give everyone privacy, there is a risk that privacy will be abused by anyone.” However, our country’s Constitution and laws acknowledge that we do not deny privacy to all because of the criminal actions of a few. The plaintiffs, in this case, are among the thousands of law-abiding Americans who desire to safeguard their online privacy but are unable to do so due to government sanctions.”

Grewal explains the four key justifications for overturning the Tornado Cash (TC) prohibition.

“Argument number 1: Because TC is not a foreign ‘national’ or ‘person,’ the government cannot sanction it.” Because TC is software, this should be self-evident. A group of people who have never met but happen to have the same token in their wallet isn’t either.

Argument number two is that the law only allows the government to penalize a person’s property. Property is something that may be owned or controlled. However, no one can change, remove, or otherwise manipulate the TC software’s 20 smart contracts. They operate independently of human intervention.

Argument number 3: Even if an ownerless entity could be considered property, these 20 smart contracts are not held by any foreign country or sanctioned person, and certainly not by those who happen to have a certain crypto token in their wallets.

Argument number 4: The sanctions are unconstitutional. They are not narrowly defined, and they prevent thousands of law-abiding Americans from utilizing TC to engage in socially useful speech simply because some criminal actors utilized it.”