gm from the Day One Law team!

Today’s legal update includes:

• Legal questions around guilty verdict in Tornado Cash trial

• GENIUS Act signed into law, CLARITY Act moves forward

• Takeaways from the White House Crypto Report

Tornado Cash co-founder found guilty of money transmission

The trial of Tornado Cash co-founder Roman Storm ended with one guilty verdict and a hung jury on the other two charges. There could be significant implications for DeFi developers. Let’s start with some background:

Allegations: The DOJ alleged that Storm built and profited from Tornado Cash, which they claimed was a tool that enabled illicit actors, including hackers tied to North Korea, to launder over $1 billion in crypto. Court filings also explained that, despite altering the smart contract to prevent anyone from disabling or modifying the underlying code, Storm and his co-founders maintained control over the website and user interface, through which the majority of Tornado Cash traffic flowed.

The case took a turn against Storm in September 2024, when Judge Katherine Failla denied a motion to dismiss. In that order, Judge Failla ruled that Tornado Cash qualified as a money transmitter, despite FinCEN guidance suggesting otherwise:

Consequently, in the eyes of the jury, the Tornado Cash platform was subject to the same AML and KYC requirements as any other money transmission service. This put Storm in a difficult position, as the court had already rejected his interpretation of the law, including the necessity of control over any transferred funds, before the jury trial began.

After the trial concluded, the jury decided as follows:

Conspiracy to operate an unlicensed money transmitting business: Guilty. 

Conspiracy to commit money laundering: Jury unable to reach a unanimous verdict.

Conspiracy to violate international sanctions: Jury unable to reach a unanimous verdict.

The verdict was reached shortly after the developers of Samourai Wallet pled guilty to conspiracy to operate an unlicensed money transmitting business, and while Storm’s verdict is expected to be appealed (and the trial decision is not binding law across America), these related results set a dangerous precedent for developers of privacy-preserving software. 

A positive outcome for developers could come in the form of the CLARITY Act, which has attached the Blockchain Regulatory Certainty Act’s language that confirms non-controlling developers aren’t money transmitters, but is yet to be signed into law.

You should know: This verdict shows that prosecutors may treat public-facing infrastructure (a UI, hosted service, or branded front end) as enough to bring a developer within AML/KYC scope, even if the underlying smart contract is non-custodial and immutable. The takeaway for teams is that integration alone can be risky: if your front end or API surfaces, routes, or otherwise facilitates access to a service prosecutors view as unlicensed, you could be cast as an operator regardless of technical decentralization.

GENIUS signed into law, CLARITY moves forward

“Crypto Week” on Capitol Hill concluded with the House passing all three legislative drafts they were set to vote on.

• The GENIUS Act was signed into law on July 18th. The White House Fact Sheet explains that this legislation establishes federal requirements for payment stablecoin issuers, such as 100 percent reserve backing, public disclosures of reserves and strict marketing rules. Importantly, stablecoin holders are prioritized as first claimant in the event of issuer insolvency.
  

• The CLARITY Act passed the House of Representatives on July 17th and must now pass the Senate before it can head to the President’s desk for signing.
  
  However, the Senate recently introduced their own version of market structure legislation, the Responsible Financial Innovation Act of 2025 (RFIA), which could delay the passing of CLARITY. They are currently seeking input on the 35-page discussion draft.
  
  The House and Senate drafts differ in significant areas, such as the classification of key digital asset terminology and whether certain assets fall under SEC or CFTC jurisdiction, among other differences.
  

• The Anti-CBDC Surveillance State Act, which would amend the Federal Reserve Act to prohibit the issuance of a U.S. central bank digital currency (CBDC), also passed the House on July 17th. It must now pass the Senate before it can become law, as the White House has stated they would sign it “in its current form.”

The final form of market structure legislation will depend on Senate negotiations in the months ahead.

You should know: GENIUS sets a federal baseline for payment stablecoins (1:1 reserves, public reserve disclosures, and first-in-line claims for holders) but its direct obligations fall on issuers.

For other projects and front ends, the exposure is indirect: if you are the primary interface or promotional channel for a stablecoin that fails these tests, regulators may potentially try to reach you through aiding-and-abetting theories, state money transmission laws, or by arguing you’re operating part of the distribution stack. That’s a playbook we’ve already seen in other enforcement actions.

CLARITY might shield non-controlling developers, but its fate and scope are tied up in Senate market structure negotiations, and safe harbors could be narrowed or delayed before reaching the President’s desk.

Report on Digital Assets from the President’s Working Group

The President’s Working Group on Digital Assets shared a 168-page report outlining the administration’s plan to make the U.S. the global leader in crypto. Recommendations include:

• Creating a fit-for-purpose regulatory framework to support innovation in DeFi, while clarifying AML obligations. Notably, this includes a statement that “lawful users of digital assets may leverage mixers to enable financial privacy.”
  

• Accelerating the adoption of dollar-backed stablecoins under the GENIUS Act
  

• Ensuring banking services are available to participants in the blockchain industry

You should know: The PWG report doesn’t create new law, but it sets out a policy perimeter: stablecoins should operate under GENIUS-style compliance, DeFi should integrate AML controls, and privacy technologies (including blockchain mixing services) can have lawful uses.

It also supports Treasury’s pending rule to treat certain mixing activity as a covered service under the Bank Secrecy Act, which would trigger reporting and recordkeeping obligations. While the report presents this as part of a “fit-for-purpose” framework, it also stresses the need to focus oversight on points of control in the ecosystem.

By defining an “application/interface layer” in DeFi, it positions public-facing UIs, APIs, and other integration points as areas that could draw regulatory attention, particularly if they provide access to assets or tools that are viewed as outside the preferred compliance perimeter. The risk is not the creation of a direct mandate; rather, the report offers a policy roadmap that agencies may use to shape enforcement priorities.

For more, you can read the full report or skim through the fact sheet. Both are linked below.

Listen To …

Law of Code

And if you’re the podcast type, I’ll recommend the Law of Code podcast episode with SEC Commissioner Hester Peirce and Crypto Task Force Chief Counsel Mike Selig (on Apple or Spotify).

It’s 30 minutes of regulators sharing their perspective on tokenized securities, what “come in and talk to us” actually means, and how projects should think about decentralization. 

The podcast was published a few days before SEC Chair Paul Atkins launched “Project Crypto,” a multi-division initiative to modernize securities rules for on-chain markets. It’s an exciting time to be building or practicing in the crypto space.

That’s it for your legal update.

As always, please reach out if you have questions or just want to riff on what we’re seeing in the market and the implications of any of the above.

Talk soon.

Nick Pullman
Day One Law