In a move that could redefine the legal landscape for software developers across the United States, Michael Lewellen has filed an opening brief in the U.S. Court of Appeals for the Fifth Circuit, challenging the government’s broad interpretation of money transmission laws. The case, which is being closely monitored by civil liberties advocates and the technology sector, seeks a pre-enforcement judgment to determine whether the act of writing, publishing, and maintaining open-source software constitutes a criminal offense under 18 U.S.C. § 1960. Lewellen’s legal challenge comes at a pivotal moment when the Department of Justice (DOJ) has increasingly utilized unlicensed money transmission statutes to prosecute developers of decentralized protocols, most notably in the high-profile cases involving Tornado Cash and Samourai Wallet.
At the heart of the dispute is whether a developer who creates non-custodial software—tools that allow users to manage their own assets without an intermediary—can be classified as a "money transmitter." Lewellen, a developer of non-custodial crowdfunding software, argues that the current regulatory ambiguity creates a "chilling effect" that forces law-abiding citizens to choose between abandoning their constitutional rights or risking federal felony charges. Backed by Coin Center, a leading non-profit research and advocacy group focused on public policy issues facing cryptocurrency, Lewellen is asking the court to establish clear boundaries on the reach of the Bank Secrecy Act (BSA) and related criminal statutes.
The Legal Threshold: 18 U.S.C. § 1960 and the Definition of Control
The statutory centerpiece of the government’s recent enforcement actions is 18 U.S.C. § 1960, which makes it a federal crime to conduct, control, manage, supervise, direct, or own all or part of an unlicensed money transmitting business. Traditionally, the definition of a money transmitter has hinged on the concept of "control." Under long-standing Financial Crimes Enforcement Network (FinCEN) guidance, a money transmitter is an entity that accepts and transmits value from one person to another or to another location.
However, the DOJ’s Southern District of New York (SDNY) has recently advanced a broader interpretation. In the prosecutions of Tornado Cash founders and the operators of Samourai Wallet, prosecutors have argued that even if a developer does not have custody of user funds, the act of providing the "architecture" or the "facility" through which transactions occur is sufficient to trigger the licensing requirement.
Lewellen’s brief argues that this interpretation is a radical departure from established law. By targeting non-custodial software, the government is essentially criminalizing the publication of mathematics and logic. Lewellen’s software is designed to facilitate crowdfunding, but unlike platforms like Kickstarter or GoFundMe, it does not hold the funds in a centralized account. Instead, it provides the code that allows users to interact directly with one another on a blockchain. Lewellen contends that because he never touches the money, he cannot be a transmitter.
A Chronology of Escalating Regulation
The tension between the developer community and federal regulators has been building for over a decade. To understand the stakes of Lewellen’s case, one must look at the timeline of how the U.S. government has approached decentralized technology:
- 2013: FinCEN issues its first major guidance on virtual currencies, stating that "users" of virtual currency are not money transmitters, but "exchangers" and "administrators" are. Crucially, it suggested that mere software developers were not subject to the BSA.
- 2019: FinCEN updates its guidance, further clarifying that providing software that others use to transmit money does not, by itself, make the provider a money transmitter. This guidance was widely seen as a "safe harbor" for open-source developers.
- 2022: The Treasury Department’s Office of Foreign Assets Control (OFAC) sanctions the Tornado Cash smart contracts, marking the first time the U.S. government sanctioned a piece of code rather than a person or entity.
- 2023-2024: The DOJ initiates criminal proceedings against Roman Storm and Alexey Pertsev (Tornado Cash) and Keonne Rodriguez and William Lonergan Hill (Samourai Wallet). These indictments explicitly target the development and hosting of software as a form of unlicensed money transmission.
- 2025-2026: In response to the "Blanche Memo"—an administrative document that offered policy suggestions but no binding legal clarity—the developer community remains in a state of legal limbo. Michael Lewellen files his lawsuit to force a judicial determination before he faces similar charges.
The First Amendment and Code as Speech
One of the primary arguments in Lewellen’s brief is that software code is a form of protected speech under the First Amendment. This is not a new legal theory; it was famously upheld in the 1990s case Bernstein v. U.S. Department of Justice, where the Ninth Circuit ruled that encryption source code was speech.
Lewellen’s brief quotes SEC Commissioner Hester Peirce, who has been a vocal critic of "regulation by enforcement." Peirce has stated that "Publishing code is speech, which the First Amendment protects." The brief argues that by threatening developers with prosecution for publishing code, the government is engaging in a prior restraint on speech.
The "chilling effect" cited by Lewellen is a documented phenomenon in the crypto-development world. Since the Tornado Cash indictments, several prominent developers have scrubbed their GitHub repositories, moved their operations outside the United States, or abandoned projects entirely. Lewellen’s brief asserts that a society founded on the rule of law should not require individuals to "bet the farm" by breaking a vaguely defined law first just to have their day in court.
The Insufficiency of "Noblesse Oblige"
A significant portion of the brief addresses the current administration’s stance on the issue. While some officials have signaled a desire to protect innovation, Lewellen argues that these "promises" are legally worthless. He specifically points to the "Blanche Memo," a document issued by the administration that reportedly instructs prosecutors to focus on "bad actors" rather than "pure developers."
However, as the brief points out, this memo offers no binding interpretation of the law. It is a matter of prosecutorial discretion—what the brief calls "noblesse oblige"—which can be revoked at any time by a change in administration or a shift in political winds. Lewellen’s legal team argues that "Law-abiding citizens like Lewellen who know the federal government thinks their protected conduct is illegal need not rely on mere prosecutorial discretion."
This point touches on the Due Process Clause of the Fifth Amendment. Due process requires that laws be clear enough for an ordinary person to understand what is prohibited. Lewellen contends that the current application of 18 U.S.C. § 1960 is unconstitutionally vague because it fails to provide developers with "fair notice" of where the line between lawful coding and criminal money transmission lies.
Industry Reactions and Broader Implications
The crypto industry and digital rights organizations have rallied behind Lewellen. Coin Center’s Executive Director, Jerry Brito, and Research Director, Peter Van Valkenburgh, have long argued that if the government’s theory holds, it could apply to any software that facilitates the movement of data that has value.
"If the SDNY’s theory is correct, then the developers of the early internet protocols, or even the developers of basic web browsers, could have been classified as money transmitters because their tools facilitated the transmission of financial data," said a spokesperson for a major blockchain advocacy group.
Economists have also weighed in on the potential impact of these prosecutions. Data from industry reports suggests that the United States’ share of the global developer workforce in the blockchain space has declined by nearly 20% over the last three years. Analysts attribute this "brain drain" directly to the aggressive regulatory environment. If the Fifth Circuit rules against Lewellen, experts predict a further exodus of talent to jurisdictions like Switzerland, Singapore, or the United Arab Emirates, which have established more specific legal frameworks for decentralized technology.
Analysis of Potential Outcomes
If the Fifth Circuit rules in favor of Lewellen, it would provide a massive victory for the open-source community. A ruling that non-custodial software development is not money transmission would create a "safe harbor" in the states covered by the Fifth Circuit (Texas, Louisiana, and Mississippi) and set a powerful persuasive precedent for other circuits.
Conversely, a ruling in favor of the government would likely embolden the DOJ to expand its prosecutions. It would solidify the theory that the "provision of financial infrastructure" is a regulated activity, regardless of whether the provider controls user funds. This would likely lead to a Supreme Court showdown, as it would create a circuit split if other courts (such as the Ninth Circuit) continue to uphold broader First Amendment protections for code.
Conclusion: A Nation of Laws
The Lewellen case is more than a dispute over cryptocurrency; it is a fundamental test of the limits of executive power in the digital age. As John Adams famously declared, the United States is intended to be a "nation of laws, not of men." Lewellen’s brief argues that the current state of affairs—where developers must rely on the "goodwill" of prosecutors rather than the text of the law—is a betrayal of that principle.
As the Fifth Circuit prepares to hear oral arguments, the eyes of the tech world remain fixed on the outcome. The decision will determine whether the United States remains a hub for open-source innovation or whether the fear of prosecution will drive the next generation of privacy-preserving tools into the shadows. For Michael Lewellen and the thousands of developers he represents, the stakes are nothing less than the future of free speech and the right to build.
