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

Coinbase’s top lawyer says “powerful” legal arguments are being made during an important moment in the lawsuit to overturn a US ban on Tornado Cash.

Paul Grewal, chief legal officer at top US exchange Coinbase, tells this 30,100 Twitter followers that he is optimistic plaintiffs will prevail in the lawsuit against the U.S. Treasury Department to overturn the ban on using the crypto mixer.

Grewal is reacting to a summary judgment filed Wednesday in U.S. District Court in Texas.

“A few months ago, Coinbase backed a legal challenge to sanctions imposed by the US government against Tornado Cash. Today the plaintiffs filed a motion for summary judgment, asking the court to reopen [Tornado Cash] for all. Their arguments are simple but powerful.”

Coinbase is funding the lawsuit, which was initially filed in September 2022 after the U.S. Treasury Department added the crypto mixer to the Specifically Designated Nationals and Blocked Persons (SDN) list, which means its use is prohibited.

The plaintiffs argue that the designation oversteps the agency’s legal authority and that it is a violation of free speech under the First Amendment of the US Constitution.

Says Grewal,

“An initial point: anytime we give privacy to everyone, there is a risk that privacy could be abused by anyone. But the Constitution and laws of our country recognize that we don’t take away privacy from all just because of the unlawful acts of a few. The plaintiffs in this challenge are among the thousands of law-abiding Americans who want to protect their privacy online, but now can’t because of the government’s sanctions.”

Grewal summarizes four main arguments being made to overturn the Tornado Cash (TC) ban.

“Argument #1: the government can’t sanction TC, because it is not a foreign ‘national’ or ‘person.’ That should be obvious, since TC is software. Nor is a group of people who’ve never met, but who just happen to hold the same token in their wallet.

Argument #2: the law only permits the government to sanction a person’s property. Property is something capable of being owned or controlled. But no one can alter, delete or otherwise control the 20 smart contracts at the core of the TC software. They function w/o human control.

Argument #3: even if an ownerless thing could somehow be property, these 20 smart contracts aren’t owned at all – not by any foreign national or sanctioned person, and certainly not by people who happen to have a certain crypto token in their wallets.

Argument #4: the sanctions violate the First Amendment. They’re not narrowly-tailored, and block thousands of law-abiding American citizens from using TC to engage in socially valuable speech, just because some bad actors also used it.”