Tornado Cash Case Ruled Moot by Treasury as Coinbase Challenges Decision

Highlights:

• The US Treasury has noted that the case against the Tornado Cash lawsuit is moot.
• Coinbase has argued that delisting Tornado Cash does not end the case and warns sanctions could return later.
• Tornado Cash appeared on the MegaETH after a developer ported the protocol to the public testnet. 

The US Treasury Department announced that it believes there is no longer a need for a final court judgment in the Tornado Cash lawsuit. This comes after it officially removed the crypto mixer from its sanctions list. The Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, claiming that North Korea’s Lazarus Group used the protocol to launder stolen crypto funds.

The sanctions triggered a legal challenge from Tornado Cash users, who argued that the sanctions were unlawful. However, following a January court ruling in favor of Tornado Cash, the Treasury delisted the protocol on March 21 and removed dozens of related smart contract addresses from its Specially Designated Nationals list.

🚨 LATEST: The US Treasury argues no final court judgment is needed in the Tornado Cash lawsuit following its action dropping Tornado Cash from the sanction list on March 21. pic.twitter.com/xTgacWPAGE

— FIRESTORM STUDIOS (@imcomingsoon_) March 24, 2025

Now, the Treasury has filed in court, stating that the lawsuit is moot as the sanctions are no longer active. The department said federal courts must review whether they still have jurisdiction, signaling that it wants the case closed without further legal proceedings. The government’s filing emphasized that because Tornado Cash is no longer sanctioned, the issue is resolved and should not require a final judgment.

Coinbase Criticizes Treasury’s Legal Approach, Citing Supreme Court Ruling

Coinbase’s chief legal officer, Paul Grewal, disputed Treasury’s position, claiming that since delisting Tornado Cash does not evidently render the case moot. He noted that the Treasury cannot end the court process by taking out the sanctions because it provides no assurances that they will not be brought back.

Relying on that decision, the Fifth Circuit rejected an agency’s argument that its withdrawal of a determination “unilaterally and avoid judicial review” did not moot the case, because the agency could decide to revisit the decision and issue a similar determination against the…

— paulgrewal.eth (@iampaulgrewal) March 23, 2025

Grewal explained that under the voluntary cessation doctrine, courts require clear proof that the challenged behavior will not occur again. He believes the Treasury has not provided that proof. He warned that Tornado Cash could still face re-sanctioning at a later date, meaning the legal risk remains unresolved. Coinbase has backed six Tornado Cash users, led by Ethereum developer Preston Van Loon, who filed suit to reverse the sanctions, claiming they violated lawful rights.

Coin Center, a crypto policy advocacy group, filed a similar lawsuit. Although Treasury initially secured a favorable ruling in 2023, a three-judge panel later overturned the decision, concluding that Treasury’s designation of Tornado Cash’s smart contracts was unlawful. Treasury challenged the ruling but eventually complied with the court’s decision by removing the sanctions.

Tornado Cash Reemerges on MegaETH Blockchain

While legal battles continue, a developer known as Gunboats ported Tornado Cash to the MegaETH blockchain’s public testnet. Gunboats said that the Treasury’s removal of the sanctions inspired them to deploy the mixing protocol on the high-speed network, which can process up to 20,000 transactions per second. The developer named the project ETHTornado and noted that no code changes were necessary.

💥BREAKING NEWS:
"Tornado Cash Goes Live on MegaETH"
After the U.S. Treasury lifted sanctions, Tornado Cash has been ported to the MegaETH testnet, marking a new chapter for the protocol. 💰#TornadoCash #MegaETH #Crypto #DeFi pic.twitter.com/hBTVYoJoub

— scoopist (@scoopistin) March 24, 2025

Gunboats used the older Truffle framework to complete the port but commented that modern tools like Foundry now simplify such development. However, some members of the crypto community believe that wallet ‘dusting’ would make users ineligible for future airdrops.