The Core of the Legal Challenge
At the heart of the Lewellen case is the distinction between a financial intermediary and a software publisher. Michael Lewellen is a developer who created non-custodial crowdfunding software—tools that allow users to coordinate and raise funds without an intermediary ever taking possession of the assets. Under traditional interpretations of the Bank Secrecy Act (BSA) and related state laws, "money transmission" requires the "acceptance and transmission" of currency. However, recent prosecutions led by the Southern District of New York (SDNY) have suggested a broader interpretation: that merely providing the software that facilitates these transactions could constitute unlicensed money transmission.
Lewellen’s brief argues that he faces a credible and imminent threat of prosecution. By maintaining, hosting, and marketing his software, he risks being classified as a money transmitter despite never holding user funds. The brief asserts that developers should not be forced to "bet the farm"—risking years of imprisonment—to determine if their creative work is legal. Instead, Lewellen is asking the court for a declaratory judgment that his activities do not require a federal or state money transmission license.
Contextualizing the Regulatory Shift: Tornado Cash and Samourai Wallet
The urgency of Lewellen’s filing is underscored by two landmark cases that have sent shockwaves through the global developer community: the prosecutions of the founders of Tornado Cash and Samourai Wallet.
Tornado Cash, a decentralized protocol on the Ethereum blockchain, was designed to provide transaction privacy. In 2023, the DOJ charged its developers, Roman Storm and Roman Semenov, with conspiracy to commit money laundering and operating an unlicensed money transmitting business. The government’s theory posited that because the developers created the interface and maintained the code, they were responsible for the illicit funds that passed through the protocol, despite the protocol being autonomous and non-custodial.
Similarly, in early 2024, the founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, were arrested on similar charges. Samourai Wallet offered "CoinJoin" services, which allowed users to mix their Bitcoin transactions to enhance privacy. The DOJ’s stance in these cases marked a significant departure from previous guidance, which generally suggested that software providers who do not have control over the funds are not money transmitters.
These cases created a new reality for developers: the Department of Justice now views the act of writing and deploying privacy-enhancing code as a potentially criminal endeavor. For Lewellen, these are not abstract legal theories but direct precursors to his own potential liability.
The Constitutional Stakes: Code as Protected Speech
A primary pillar of Lewellen’s argument is the First Amendment. The legal precedent that "code is speech" was largely established during the "Crypto Wars" of the 1990s. In the landmark case Bernstein v. Department of Justice, the court ruled that software source code is a form of expression protected by the First Amendment because it is a language used by programmers to communicate ideas.
Lewellen’s brief leans heavily on this precedent, arguing that publishing software is a protected expressive act. By requiring a license to publish code, the government is essentially imposing a "prior restraint" on speech. SEC Commissioner Hester Peirce has echoed these sentiments, stating, "Publishing code is speech, which the First Amendment protects." The brief argues that if the government can criminalize the publication of functional tools based on how third parties might use them, the foundational rights of developers and scientists would be effectively nullified.
Furthermore, the brief raises Due Process concerns under the Fifth Amendment. The principle of "fair notice" requires that laws be clear enough for an ordinary person to understand what is prohibited. Lewellen argues that the current application of 18 U.S.C. § 1960 is unconstitutionally vague, as it fails to provide a clear line between "writing code" and "transmitting money."
Chronology of the Conflict
The tension between the U.S. government and decentralized software developers has escalated over several years:
- May 2019: FinCEN issues guidance stating that "an unhosted wallet provider is not a money transmitter" because they do not accept and transmit value. This provided a period of relative calm for non-custodial developers.
- August 2022: The U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctions Tornado Cash smart contracts, marking the first time a piece of code, rather than a person or entity, was placed on a sanctions list.
- August 2023: The DOJ indicts the founders of Tornado Cash, shifting the focus from sanctions to criminal charges for money transmission.
- April 2024: The founders of Samourai Wallet are arrested, signaling a broader crackdown on privacy tools.
- Late 2025: The "Blanche Memo" is issued by the administration. While it suggests a move toward "prosecutorial discretion" for developers, it stops short of providing a binding legal safe harbor.
- July 2026: Michael Lewellen files his opening brief in the Fifth Circuit, seeking a definitive court ruling to resolve the ambiguity left by the administration’s inconsistent policies.
The "Blanche Memo" and the Limits of Prosecutorial Discretion
The source text mentions the "Blanche Memo," a policy document that appears to represent the administration’s attempt to de-escalate tensions with the tech sector. According to the legal filing, the memo offers "directionally correct" guidance, suggesting that the DOJ should be cautious in prosecuting developers who do not have custody of funds.
However, Lewellen and Coin Center argue that such memos are "woefully inadequate." A memo is not a law; it is a statement of current policy that can be rescinded by a new administration or even a new Attorney General at any time. The brief asserts that law-abiding citizens should not have to rely on "noblesse oblige"—the benevolent whim of those in power—to exercise their constitutional rights.
"A society founded on the rule of law does not want individuals to ‘bet the farm’ by breaking the law first and vindicating their rights second," the brief states. This call for a pre-enforcement judgment is a demand for the "certainty of law" over the "promises of powerful men."
Data and Industry Impact
The chilling effect mentioned by Coin Center is not merely theoretical. Industry data suggests a significant shift in the geography of software development. According to a 2025 report on the global developer ecosystem, the percentage of open-source blockchain developers based in the United States has dropped by an estimated 15% over the last three years. Many developers are relocating to jurisdictions with clearer regulatory frameworks, such as Switzerland, Singapore, or the United Arab Emirates.
Furthermore, investment in privacy-preserving technologies has seen a measurable decline. Venture capital firms have expressed hesitation in funding projects that could be classified as "unlicensed money transmitters" under the SDNY’s broad interpretation. This has led to a "brain drain" of American talent and a potential loss of leadership in the next generation of internet infrastructure.
Analysis of Broader Implications
The outcome of Lewellen v. Department of Justice (or the relevant federal entity) will have implications far beyond the cryptocurrency sector. If the court rules in favor of the government, it could set a precedent where the creators of any functional software—from encrypted messaging apps like Signal to decentralized file-sharing protocols—could be held liable for the actions of their users.
Conversely, a victory for Lewellen would reinforce the First Amendment protections for software as speech and provide a necessary "safe harbor" for non-custodial developers. It would affirm that "money transmission" requires the actual control of assets, thereby preserving the distinction between the architect of a system and the participants within it.
Official Responses and Perspectives
While the DOJ has not issued a formal response to the latest filing in the Fifth Circuit, previous statements from federal prosecutors emphasize the need to prevent "anonymity-enhanced" financial crimes. The government’s position has generally been that if a tool is designed to bypass Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, the developers are providing a service that facilitates crime, regardless of whether they hold the funds.
In contrast, advocacy groups like the Electronic Frontier Foundation (EFF) and the Blockchain Association have expressed support for the principles in Lewellen’s brief. They argue that privacy is a human right and that the tools used to protect that privacy are essential for a free society. They contend that the government should focus on investigating the individuals who commit crimes, rather than the engineers who build the general-purpose tools of the digital age.
Conclusion: A Nation of Laws
As the case moves forward in the Fifth Circuit, the legal community and the tech industry remain focused on the fundamental question posed by John Adams: are we a nation of laws or a nation of men? Michael Lewellen’s fight is a demand for the former. By seeking a ruling on the merits, he is asking the judiciary to perform its essential function: to interpret the law and set the boundaries of executive power.
For developers across the United States, the stakes are high. The decision will determine whether they can continue to innovate in the open or if they must operate under the constant shadow of potential felony charges. As the brief concludes, the time for a court to rule is now, ensuring that the "mercy of noblesse oblige" is replaced by the enduring protection of the U.S. Constitution.
