Crypto developer Michael Lewellen's case to shield his donation software from prosecution was dismissed by a Texas judge, highlighting ongoing legal uncertainties for crypto develo
A Texas federal court dismissed a lawsuit filed by crypto developer Michael Lewellen, who sought a declaratory judgment that his software, Pharos, used for charitable crowdfunding donations, would not face prosecution under money transmission laws.
Lewellen, a fellow at Coin Center, argued in his January complaint that similar software developers have been prosecuted, pointing to cases like Tornado Cash and Samourai Wallet as evidence of potential legal risks.
Court's Reasoning and DOJ Memo
Chief US District Judge Reed O’Connor ruled on Wednesday that Lewellen failed to show a credible threat of imminent prosecution, leading to the dismissal without prejudice.
The court referenced a Department of Justice memo stating that it will not target virtual currency services for end-user actions or unwitting violations, though Lewellen called this memo insufficient for legal certainty.
In the Tornado Cash case, co-founder Roman Storm was convicted last year of conspiracy to operate an unlicensed money-transmitting business, while Samourai Wallet co-founders were also found guilty on similar charges.
Judge O’Connor distinguished these from Lewellen’s situation, noting that the core conduct in those cases involved money laundering, whereas Lewellen’s involves running a business without knowingly transmitting criminal funds.
Lewellen stated on X that his lawyers are exploring all options for refiling the suit with modifications, as the dismissal allows for potential future action.
Calls for Legislative Change
Coin Center’s executive director Peter Van Valkenburgh criticized the memo for not protecting developers adequately, given the outcomes in the cited cases.
Both Van Valkenburgh and Lewellen urged Congress to pass the Blockchain Regulatory Certainty Act of 2026, introduced by Senator Cynthia Lummis, which would clarify that non-custodial software developers are not subject to money transmitter laws.
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