A US judge has ruled that software code used in crypto protocols like Tornado Cash does not qualify for First Amendment protection, rejecting arguments that deploying such code is protected as free speech.
The decision, delivered by Judge Katherine Polk Failla in the Southern District of New York on Sept. 26, also sets a precedent for treating crypto protocols as money transmitters, even when developers do not control the funds being transmitted.
The ruling has significant implications for the crypto industry, particularly for Tornado Cash developer Roman Storm’s upcoming trial, which has been scheduled for Dec. 2.
Storm, who faces charges of money laundering, operating an unlicensed money-transmitting business, and evading US sanctions, argued that his role in developing and deploying the Tornado Cash protocol should be protected under free speech laws.
Judge Failla rejected this argument, clarifying that while code can be expressive, using it to execute functions like money transmission does not fall under free speech protections.
Control over funds not required
The judge’s ruling has broad implications for the ongoing legal battles involving crypto protocols like Tornado Cash and Samourai Wallet.
Prosecutors have argued that both Tornado Cash and Samourai Wallet are unlicensed money-transmitting businesses that failed to comply with US sanctions laws, particularly in light of Tornado Cash’s alleged involvement in facilitating cybercrime and sanctions evasion.
In her ruling, Judge Failla emphasized that control over funds is not required to qualify as a money transmitter under the BSA.
The court agreed with US prosecutors, who have argued that businesses like Tornado Cash and Samourai Wallet meet the criteria for money transmission, even without directly controlling the funds in question.
Storm’s trial is scheduled to begin on Dec. 2 to face the charges levied against him by the US government. His legal team has indicated plans to appeal, as this case could have a far-reaching impact on how developers of blockchain technology are held accountable under US law.
Industry criticizes ruling
The decision has drawn wide criticism from the crypto industry and beyond. DeFi Education Fund chief legal officer Amanda Tuminelli expressed disappointment with the ruling, stating that it could expand developer liability in unprecedented ways. She added:
“The consequences of this trial will be life changing for Storm and potentially for software devs in across industries.”
Meanwhile, Variant chief legal officer Jake Chervinsky slammed the court’s decision, calling it a troubling precedent for software developers. He said:
“Judge Failla’s ruling… is an assault on the freedom of software developers everywhere. This will go down in history as a perversion of law and a travesty of justice.”
Despite these concerns, the ruling provides clarity on a contentious legal issue — whether crypto businesses can claim immunity from BSA requirements if they do not control the funds they help transmit.
The court’s decision also addresses the broader crypto industry as regulators and legislators continue to grapple with how to apply existing financial laws to rapidly evolving technologies. Appeals are expected, and further legal clarification could come as the case moves forward.
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