A federal judge in Texas has tossed a preemptive suit by crypto developer Michael Lewellen seeking a declaratory judgment that his donation‑facilitating software, Pharos, does not violate money‑transmission laws. Chief U.S. District Judge Reed O’Connor dismissed the case after concluding Lewellen had not shown a credible threat of imminent prosecution.
The court pointed in part to a Department of Justice memo stating the DOJ will no longer target virtual currency exchanges, mixing and tumbling services, or offline wallets for the acts of their end users or for unwitting regulatory violations. Lewellen said on X that he was “disappointed” by the dismissal and called the memo “no substitute for real legal certainty.”
Lewellen, a fellow at advocacy group Coin Center which supported the lawsuit, argued developers face real legal risk because creators of similar non‑custodial software have been prosecuted. He pointed to prosecutions involving Tornado Cash and Samourai Wallet: Tornado Cash co‑founder Roman Storm was convicted last year of conspiracy to operate an unlicensed money‑transmitting business, and the Samourai Wallet founders were similarly convicted. Lewellen said those cases show developers can be exposed to criminal liability even when their projects do not custody user funds.
Judge O’Connor distinguished those prosecutions, finding their “core conduct” centered on money laundering while Lewellen’s alleged core conduct would be operating a business. The judge noted Lewellen had disclaimed any knowing transmission of criminal funds, which the court viewed as a key difference from the cited cases.
The dismissal was without prejudice, so Lewellen may refile after addressing the court’s concerns. His lawyers said they are exploring next steps. Coin Center’s executive director, Peter Van Valkenburgh, criticized the court’s reliance on the DOJ memo, arguing it has not provided meaningful protection to developers given recent convictions. Both he and Lewellen have urged Congress to pass the Blockchain Regulatory Certainty Act of 2026, introduced by Senator Cynthia Lummis, which would clarify that developers and providers of non‑custodial software who do not control user funds are not subject to money‑transmitter laws.
Van Valkenburgh called the memo a “vague enforcement signal, not a durable limit on government power,” and said it is no substitute for clear legal rules or judicial guidance.