Coinbase’s lawsuit claims that by banning Tornado Cash, the Treasury overstepped legal boundaries and violated the First Amendment.

In a filing on May 24, six people sought to lift the ban on cryptocurrency mixer Tornado Cash, the platform that enhanced privacy by mixing transactions. In the filing, they presented four major arguments. The filing lends credence to the Sept. 8, 2022 lawsuit against the United States Treasury that was supported by Coinbase.

In the most recent recording, the offended parties contended that this case is “not tied in with cutting out unique principles for new innovation” yet rather, considering the Depository answerable for overextending in its choice to authorize Twister Money. The six offended parties incorporate Joseph Van Nut case, Tyler Almeida, Alexander Fisher, Preston Van Crackpot, Kevin Vitale, and Nate Welch.

According to the plaintiffs, the Treasury failed to identify Tornado Cash as a “foreign national.” Additionally, the plaintiffs questioned the Treasury’s interpretation of what Tornado Cash was. As indicated by the Depository, Cyclone Money is a unincorporated affiliation that incorporates any individual who holds a computerized TORN token, independent of whether the people have joined for any normal reason.

The plaintiffs argued that this definition does not conform to the Treasury’s definition of an “unincorporated association.” In addition, the filing stated:

“The oddity of that definition is underscored by the Department’s unprecedented step of explicitly excluding from the designation the very individuals that it says create the “organizational structure” of that association.”

Paul Grewal, Coinbase’s chief legal officer, stated in a Twitter thread that the Treasury’s definition is “novel as a legal theory, and it’s wrong as a factual matter.”

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Additionally, the plaintiffs pointed out that penalties only apply to “property,” which is defined as anything that can be owned. However, the Treasury did not specify how Tornado Cash’s open-source, immutable smart contracts can be owned.

The offended parties additionally said that regardless of whether the shrewd agreements of Twister Money were some way or another ended up being “property,” the Depository actually needs to show that Cyclone Money has an “premium” in them. As per the Worldwide Crisis Financial Powers Act (IEEPA), the Depository should show that the Twister Money substance has a lawful, impartial, or valuable premium in the property. The plaintiffs contend, however, that the Treasury Department has not demonstrated any such “interest.”

Grewal set it all the more forth plainly:

“No one – not the founders, not the developers, and certainly not the people who just happen to have TORN in their wallets–has a property interest in these immutable smart contracts.”

Tornado Cash sanction is unconstitutional, plaintiffs claim

The plaintiffs argued that the sanction is unconstitutional because it violates the First Amendment right to free speech. According to the plaintiffs, the Treasury’s justifications for the ban amount to “little more than saying that Plaintiffs are free to engage in speech elsewhere,” as they put it.

According to Grewal, the government “can’t simply tell law-abiding Americans to exercise their freedom in some other venue with far fewer personal protections,” which is why the ban is “worrisome.”

Grewal made it clear that the plaintiffs are not seeking crypto-specific rules. Instead, they request that the government comply with the fundamental legal requirements prior to restricting access to a privacy tool that “protects legal purchases and donations.”