A federal court dismissed a lawsuit by cryptocurrency developer Michael Lewellen seeking clarity on whether his non-custodial software would violate U.S. money-transmitter laws. The judge ruled he failed to show a credible threat of prosecution, leaving a key legal question unresolved for developers of decentralized financial tools.
A U.S. federal court dismissed a lawsuit filed by software developer Michael Lewellen. He had sought a preemptive ruling that his planned non-custodial crypto donation platform, Pharos, would not require him to register as a money transmitter. The court found Lewellen did not demonstrate a credible threat of prosecution under federal law governing unlicensed money-transmitting businesses.
The ruling noted recent Justice Department guidance indicated authorities would not pursue enforcement actions against crypto businesses for end users’ actions or for inadvertent regulatory violations. This undermined Lewellen’s claim that he faced a credible risk of prosecution. “A non-binding DoJ memo is no substitute for real legal certainty,” Lewellen wrote on social media following the ruling.
The case was dismissed without prejudice, meaning Lewellen could bring the challenge again if circumstances change. The court did not rule on the core question of whether non-custodial software developers fall within the scope of U.S. money transmitter laws. The decision leaves this significant legal issue unresolved for the industry.
The case drew support from several cryptocurrency advocacy groups, including the Blockchain Association, Paradigm, the DeFi Education Fund, and the Uniswap Foundation. This reflects broader industry concern about developer liability under financial laws designed for intermediaries that hold customer funds. The ruling comes amid ongoing legal scrutiny of software developers, including the retrial of Tornado Cash developer Roman Storm.
