The New Jersey Division of Consumer Affairs has settled with the developers behind Tidbit, a student hackathon project that experimented with bitcoin mining as an alternative to online advertising.

Under the terms of the settlement, Tidbit's developers have agreed not to access New Jersey computers unlawfully for a period of two years. Should the developers be found in violation of the provision, a release from the government said they would be assessed a $25,000 penalty.

The resolution marks the end of a controversial court case that began when MIT student Jeremy Rubin received a subpoena in December 2013. At issue was the question of whether Tidbit was ever operational enough to be in violation of the law.

New Jersey officials maintain that their investigation found that Tidbit accessed computers owned by individuals without their consent. The non-profit Electronic Frontier Foundation (EFF), which represented Rubin, says that this assertion is false.

EFF senior staff attorney Hanni Fakhoury told CoinDesk:

The EFF maintains the code was operational for "two days", and that no bitcoins were mined when the program was live. New Jersey continues to allege that the developers' activities constitute violations of the state's Computer Related Offenses Act and Consumer Fraud Act.

"Innovations that affect consumers must operate in compliance with the law," Attorney General John Hoffman said in a statement. "No website should tap into a person’s computer processing power without clearly notifying the person and giving them the chance to opt out.”

Hoffman acknowledged that New Jersey does not believe Tidbit was created for the purpose of invading user privacy. However, he inferred that New Jersey's actions were justified, citing the state's need to protect the privacy interests of its citizens.

"This potentially invasive software raised significant questions about user privacy and the ability to gain access to and potentially damage privately owned computers without the owners’ knowledge and consent," Hoffman continued.

According to the state, Tidbit's code was found to to be active on three websites that were registered and located in New Jersey.

Such findings conflict with the opinions of the EFF, which maintains the code was not operable and that Tidbit's developers never actually profited from program.

In interview, Fakhoury expressed his belief that the government "overreached" in its prosecution of the Tidbit developers. While no monetary penalties were assessed, Fakhoury still expressed a fear that the action would deter innovation within the digital currency space in the future.

"We worry this is going to send a message that will chill people from engaging in research and innovative projects," he said.

Fakhoury suggested that he doesn't believe the resolution means a similar program to Tidbit couldn't be lawfully developed. However, he indicated that the students involved in the project have since had to deal with the negative consequences of the protracted ordeal.

The case, according to Fakhoury, put a strain on the friendships of those involved and collapsed negotiations between the developers and venture capital firms that might have otherwise invested in the project.

"I think the most unfortunate about the whole thing is that it stunted their ability to develop it further," Fakhoury continued, concluding:

Pete Rizzo contributed reporting

New Jersey capitol image via Shutterstock