In a legal move that could redefine the boundaries of software development and financial regulation in the United States, Michael Lewellen has filed an opening brief in the U.S. Court of Appeals for the Fifth Circuit. The filing challenges the federal government’s interpretation of money transmission laws, arguing that the current regulatory environment creates an unconstitutional "chilling effect" on developers of non-custodial software. Supported by the cryptocurrency advocacy group Coin Center, Lewellen is seeking a pre-enforcement judgment to establish that the act of writing and publishing open-source code does not constitute unlicensed money transmission under 18 U.S.C. § 1960.
The case arrives at a critical juncture for the American technology sector. As federal prosecutors in the Southern District of New York (SDNY) pursue high-profile cases against the creators of privacy-preserving tools like Tornado Cash and Samourai Wallet, the broader developer community has expressed growing alarm. Lewellen’s brief contends that without judicial intervention, the threat of felony prosecution will stifle innovation, infringe upon First Amendment rights to free speech, and erode the privacy protections of millions of digital asset users.
The Legal Core: 18 U.S.C. § 1960 and Non-Custodial Software
At the heart of the dispute is 18 U.S.C. § 1960, a federal statute that criminalizes the operation of an "unlicensed money transmitting business." Historically, this law was designed to target underground banking systems and traditional financial intermediaries that move funds on behalf of third parties. However, the Department of Justice (DOJ) has recently expanded its application to include developers of decentralized protocols and non-custodial wallets—tools that allow users to maintain control of their own funds without a middleman.
Lewellen, a developer of non-custodial crowdfunding software, argues that his work is fundamentally different from a money-transmitting business. In a non-custodial system, the developer writes the code, but the users execute the transactions themselves on a blockchain. The developer never takes possession of user funds, nor do they have the power to stop or redirect transactions.
The brief argues that by treating software authors as "money transmitters," the government is misapplying a law intended for custodial financial institutions. This expansion, Lewellen asserts, creates a "trap for the unwary," where individuals may face years in prison for the simple act of publishing mathematics and logic in the form of computer code.
A Chronology of Escalating Tensions
The path to the Fifth Circuit has been marked by a series of regulatory shifts and aggressive enforcement actions that have fundamentally altered the landscape for blockchain developers:
- 2013–2019: Early Guidance. The Financial Crimes Enforcement Network (FinCEN) initially suggested that "users" and "software providers" were not money transmitters. However, 2019 guidance began to blur these lines, suggesting that some decentralized applications could fall under the Bank Secrecy Act (BSA) if they engaged in "acceptance and transmission" of value.
- August 2022: Tornado Cash Sanctions. The Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned the Tornado Cash smart contracts. Shortly thereafter, developer Alexey Pertsev was arrested in the Netherlands, and Roman Storm was later charged in the U.S. This marked the first major instance of the government targeting the authors of autonomous code.
- April 2024: The Samourai Wallet Takedown. Federal authorities arrested the founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, charging them with conspiracy to commit money laundering and operating an unlicensed money transmitting business. Unlike previous cases, this focused heavily on the developers of a non-custodial wallet tool.
- Late 2024 – 2025: The "Blanche Memo" and Policy Shifts. Amidst political pressure, internal Department of Justice memos—specifically those associated with official Todd Blanche—suggested a move toward a more restrained approach to non-custodial software. However, these memos were non-binding and did not offer a formal safe harbor for developers.
- July 2026: The Lewellen Brief. Facing continued uncertainty and the threat of prosecution for his crowdfunding software, Michael Lewellen filed his opening brief in the Fifth Circuit, demanding a definitive ruling on the legality of his conduct.
The Constitutional Argument: Code as Speech
A central pillar of Lewellen’s brief is the First Amendment. The argument that "code is speech" has a long history in American jurisprudence, most notably in the 1990s "Crypto Wars" case Bernstein v. United States. In that instance, the Ninth Circuit ruled that software source code is a form of expression protected by the First Amendment, preventing the government from restricting the publication of encryption algorithms.
Lewellen’s legal team argues that by threatening to prosecute developers for publishing open-source tools, the government is engaging in a prior restraint on speech. The brief quotes SEC Commissioner Hester Peirce, who has frequently dissented from her agency’s aggressive stance on crypto, noting that "publishing code is speech."
Furthermore, the brief invokes the Fifth Amendment’s Due Process Clause. Lewellen argues that the term "money transmitter" has become so vaguely defined by the DOJ that a person of ordinary intelligence cannot know what conduct is prohibited. This "void for vagueness" argument is intended to prevent the government from using broad statutes to conduct "prosecution by ambush."
Data and the Chilling Effect on Innovation
The stakes are not merely theoretical. Supporting data cited by Coin Center and other industry observers suggest a significant migration of talent and capital away from the United States due to regulatory uncertainty.
- Developer Migration: According to a 2025 report on the global developer ecosystem, the U.S. share of open-source blockchain developers has fallen by an estimated 15% since the Samourai Wallet arrests. Many developers have relocated to jurisdictions with clearer "safe harbor" laws for non-custodial software, such as Switzerland or the United Arab Emirates.
- Investment Stagnation: Venture capital funding for privacy-focused decentralized finance (DeFi) projects in the U.S. saw a 40% year-over-year decline in 2025. Investors cite the risk of "secondary liability" for developers as a primary reason for the pullback.
- Privacy Eradication: The chilling effect extends to users. As developers cease maintaining privacy tools for fear of arrest, law-abiding citizens lose the ability to protect their financial data from hackers, identity thieves, and state surveillance.
Official Responses and the "Noblesse Oblige" Problem
The government’s response to these concerns has largely centered on the "Blanche memo," a document intended to signal a more nuanced approach to crypto enforcement. The administration has argued that it does not intend to target "pure" software developers who have no involvement in the operation of a business.
However, Lewellen’s brief dismisses these assurances as insufficient. The brief argues that the DOJ has repeatedly refused to stipulate in court that non-custodial software development is legal. Instead, the government relies on "prosecutorial discretion"—essentially asking developers to trust that they won’t be arrested, provided they stay on the government’s good side.
"Law-abiding citizens like Lewellen… need not rely on mere prosecutorial discretion—leaving their liberty at the mercy of noblesse oblige," the brief states. This reference to "noblesse oblige"—the inferred responsibility of the privileged to act with generosity—suggests that the government is treating constitutional rights as "favors" to be granted or withheld by the executive branch rather than as inherent protections.
Broader Impact and Implications for the Rule of Law
The outcome of Lewellen v. United States (or the corresponding case in the Fifth Circuit) will have ramifications far beyond the cryptocurrency industry. If the court rules in favor of Lewellen, it would establish a landmark precedent protecting the rights of all software developers to create and distribute tools without fear of being classified as financial institutions.
Conversely, a ruling in favor of the government could embolden federal agencies to apply financial regulations to a wide array of technological activities. This could include developers of peer-to-peer messaging apps, decentralized social media protocols, or any software that facilitates the exchange of data that could be construed as "value."
From a privacy perspective, the case is seen as a "last stand" for financial anonymity in the digital age. Without the ability to develop and maintain privacy-preserving code, the financial system would move toward a state of total transparency, where every transaction is tracked and recorded by centralized authorities.
Conclusion: A Nation of Laws
As the Fifth Circuit prepares to hear the case, the core of the argument remains rooted in a fundamental principle of American democracy. As cited in the brief, John Adams famously declared that the United States is a "nation of laws, not of men."
Michael Lewellen’s fight is a demand for the "certainty of law." By seeking a pre-enforcement judgment, he is asking the judiciary to perform its constitutional role: to check the power of the executive branch and provide a clear boundary for what is legal and what is not. In an era where technology often moves faster than legislation, the court’s decision will determine whether the First Amendment remains a robust shield for the digital pioneers of the 21st century or if it will be sidelined in the name of expansive financial surveillance.
The legal community and the tech industry now look to the Fifth Circuit for a ruling that will either solidify the right to write code or grant the government unprecedented power over the tools of the modern economy.
