From Monday’s opinion by Judge T. Kent Wetherell, II (N.D. Fla.) in Coin Center v. Yellen (for a similar decision, see this August post about Van Loon v. Dep’t of Treasury):
Plaintiffs argue that [the government’s restriction on the use of] Tornado Cash [a mechanism for further anonymizing cryptocurrency transactions] violated the First Amendment because it chilled Plaintiffs’ protected rights of association by blocking a financial privacy tool they relied on to make donations to organizations and causes and it was not narrowly tailored to achieve its aims. Defendants responds that the First Amendment was not implicated by OFAC’s designation of Tornado Cash and, and even if it was, the designation satisfies the requisite level of scrutiny.
Plaintiffs do not cite any authority supporting the existence of a First Amendment right to use a particular service or type of currency to make donations for charitable or other purposes. The freedom of association cases cited by Plaintiffs are distinguishable because those cases involve government action that compelled private associations to disclose their major donors or members. See Americans for Prosperity Found. v. Bonta (2021); Gibson v. Florida Legislative Investigation Comm. (1963). Here, the designation of Tornado Cash did not compel private associations to disclose anything about their donors or members.
The Court did not overlook Plaintiffs’ reliance on Meyer v. Grant (1988), for the proposition that the government violates the First Amendment when it “restricts access to the most effective, fundamental, and perhaps economical avenue of political discourse.” However, that case does not help Plaintiffs here for two reasons.
First, Meyer is a free speech case that dealt with the chilling consequences that a ban on paying the circulators of initiative petitions would have on disseminating “political discourse.” Here, Plaintiffs have raised a freedom of association claim, not a free speech claim.
Second, the designation of Tornado Cash does not preclude Plaintiffs (or anyone else) from spending money or donating money for political ends, nor does it preclude organizations from accepting anonymous donations. The fact that Tornado Cash may be Plaintiffs’ preferred way of maintaining their financial privacy does not mean that it is the only way for them to do so. Indeed, it is noteworthy that one of the plaintiffs stated in his declaration that Tornado Cash is used “in his regular rotation of privacy tools,” which implies that there are other privacy tools that are available to Plaintiffs.
Accordingly, for the reasons stated above, the Court finds that the designation of Tornado Cash did not implicate Plaintiffs’ First Amendment rights. {Based on this conclusion, the Court need not consider what level of scrutiny applies to the designation of Tornado Cash or whether the designation would withstand that level of scrutiny.}
Here’s more on the legal backstory:
The International Emergency Economic Powers Act (IEEPA) authorizes the President to declare national emergencies “to deal with any unusual and extraordinary [foreign] threat … to the national security, foreign policy, or economy of the United States.” Pursuant to that authority, the President declared national emergencies with respect to malicious foreign cyber-enabled activities, and North Korea’s pursuit of its nuclear missile program.
After a national emergency is declared, the IEEPA authorizes the President to “regulate … or prohibit … any use [of], transfer [of], … dealing in, … or transactions involving, any property in which any foreign country or a national thereof has any interest.” Pursuant to that authority, the President blocked all property and interests in property of any person determined by the Secretary of the Treasury to have materially assisted, sponsored, or provided financial, material, or technological support for foreign malicious cyber-enabled activities that threaten the national security, foreign policy, or economic health or financial stability of the United States and the North Korean government.
The Secretary of the Treasury delegated the authority granted by Executive Orders 13694 and 13722 to the Director of the Office of Financial Assets Control (OFAC).
On November 8, 2022, OFAC designated “Tornado Cash” as a Specially Designated National or Blocked Person. The effect of the designation is that “unless licensed or otherwise authorized by [OFAC], (1) all real, personal, and any other property and interests in property of [Tornado Cash] … are blocked and may not be transferred, paid, exported, withdrawn or otherwise dealt in, and (2) any transaction or dealing … in property or interests in property of [Tornado Cash] is prohibited.”
The designation described Tornado Cash as
an entity with an organizational structure that consists of: (1) its founders—Alexey Pertsev, Roman Semenov, and Roman Storm—and other associated developers, who together launched the Tornado Cash mixing service, developed new Tornado Cash mixing service features, created the Tornado Cash Decentralized Autonomous Organization (DAO), and actively promote the platform’s popularity in an attempt to increase its user base; and (2) the Tornado Cash DAO, which is responsible for voting on and implementing those new features created by the developers.
The designation listed 91 Internet addresses that were affiliated with Tornado Cash, including the addresses for the “smart contracts” that Plaintiffs refer to as the “core software tool” of the Tornado Cash service….
Cryptocurrency is a virtual currency that can be used for payment or investment purposes…. Tornado Cash is a cryptocurrency “mixing service” that was founded by two Russians (Alexey Pertsev and Roman Semenov), Roman Storm, and other associated developers…. The Tornado Cash service uses smart contracts—which are essentially computer software created by its developers …. The smart contracts allow Ethereum users to deposit ETH [Ethereum coins] into a “pool” where it is mixed with other users’ deposits and then withdrawn at a time of the user’s choosing. The more users that have deposited ETH into the pool the more difficult it is to connect the withdrawal with a particular deposit, which thereby provides a degree of anonymity to the user’s transaction that is not available on the public ledger….
Tornado Cash transactions can be (and 84% are) executed with the aid of third-party “relayers.” The use of a relayer makes it even harder to identify the parties to the transaction, but transactions can be completed without a relayer….
The court also upheld the government’s actions against various other claims by Coin Center.
The government defendants are represented by Christine L. Coogle and Christopher Robert Healy of the Justice Department.
The post Government Blocking of "Tornado Cash" Cryptocurrency-Related Service Was Legal, Didn't Violate First Amendment appeared first on Reason.com.
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