Developer Lewellen lays out what’s at stake for open-source speech and user privacy.

In a legal move that could redefine the boundaries of software development and financial regulation in the United States, software developer 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 unlicensed money transmission laws, arguing that the current prosecutorial environment creates an unconstitutional "chilling effect" on the creation and distribution of open-source software. Supported by the cryptocurrency advocacy group Coin Center, Lewellen is seeking a pre-enforcement judgment that would clarify whether the act of writing and publishing non-custodial code subjects a developer to the same licensing requirements as traditional financial institutions.

The case, which arrives amidst a period of intense regulatory scrutiny for the decentralized finance (DeFi) sector, centers on the application of 18 U.S.C. § 1960. This federal statute makes it a felony to operate an "unlicensed money transmitting business." Traditionally, this law has been applied to entities like Western Union or centralized cryptocurrency exchanges that take physical or digital possession of customer funds. However, recent actions by the Department of Justice (DOJ), specifically within the Southern District of New York (SDNY), have signaled a shift toward holding developers liable for the eventual use of their code by third parties, even when the developers never exercise control over the assets being moved.

The Core Conflict: Code as Speech vs. Regulated Activity

At the heart of Lewellen’s argument is the assertion that software code is a form of protected speech under the First Amendment. This legal theory draws on the "Crypto Wars" of the 1990s, most notably the landmark case Bernstein v. United States, where the Ninth Circuit ruled that computer source code is speech and that government efforts to restrict its publication were subject to constitutional scrutiny.

Lewellen’s brief contends that his work—specifically the development of non-custodial crowdfunding software—is an exercise of his right to publish information. Unlike custodial services, non-custodial software provides the tools for users to interact directly with a blockchain. The developer does not act as an intermediary, does not hold private keys, and does not facilitate the execution of transactions. Lewellen argues that by threatening to classify such activity as "money transmission," the government is essentially imposing a prior restraint on speech, forcing developers to choose between self-censorship and the risk of life-altering felony charges.

The brief highlights a "credible threat of prosecution" that has emerged following high-profile cases involving privacy-preserving tools. The prosecutions of the founders of Tornado Cash and Samourai Wallet have sent shockwaves through the developer community. In those cases, the government alleged that providing the software used to obfuscate transaction histories constituted unlicensed money transmission and money laundering. Lewellen argues that these precedents have created an environment of "legal gray zones" where any developer working on financial privacy or decentralized tools could be next.

Chronology of Regulatory Escalation

The legal tension surrounding open-source financial software has been building for several years, marked by a series of enforcement actions and policy shifts:

• August 2022: The U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a decentralized protocol. This was a pivotal moment, as it was the first time a smart contract (autonomous code) rather than a person or entity was added to the Specially Designated Nationals (SDN) list.
• August 2023: The DOJ unsealed an indictment against Roman Storm and Roman Semenov, the creators of Tornado Cash. They were charged with conspiracy to commit money laundering and operating an unlicensed money transmitting business.
• April 2024: Keonne Rodriguez and William Lonergan Hill, the founders of Samourai Wallet, were arrested and charged with similar offenses. The SDNY argued that their "mixing" service, despite being non-custodial in nature, functioned as a money-transmitting business.
• Late 2025/Early 2026: The emergence of the "Blanche memo," an internal administration document that reportedly suggested a more lenient approach toward developers. However, as Lewellen’s brief notes, the memo is non-binding and does not carry the weight of law, leaving developers in a state of perpetual uncertainty.
• July 2026: Michael Lewellen files his opening brief in the Fifth Circuit, marking a definitive attempt to force a judicial ruling on the limits of 18 U.S.C. § 1960.

The "Bet the Farm" Dilemma and Pre-enforcement Relief

A central pillar of Lewellen’s filing is the necessity of a pre-enforcement judgment. In standard legal practice, a defendant usually challenges the constitutionality of a law after they have been charged. However, Lewellen argues that the stakes in this instance are too high to wait for an indictment. "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.

By seeking a declaratory judgment, Lewellen is asking the court to rule on the legality of his actions before he publishes or markets his crowdfunding tools. This procedural path is often used when a law is so vague or its application so broad that it discourages the exercise of constitutional rights. Lewellen’s legal team argues that the DOJ has repeatedly refused to provide a clear "safe harbor" for non-custodial development, leaving developers to rely on "noblesse oblige"—the hope that the government will simply choose not to prosecute them.

Supporting Data: The Impact on Innovation and Privacy

The broader implications of this case are reflected in the shifting landscape of the U.S. technology sector. Data suggests that the aggressive stance of the SDNY and other regulators is leading to a "brain drain" of blockchain talent from the United States. According to a 2025 report on developer trends, the U.S. share of open-source crypto developers has declined by nearly 15% over the last three years, with many relocating to jurisdictions like Switzerland, Singapore, or the United Arab Emirates, where regulatory frameworks for DeFi are more clearly defined.

Furthermore, the privacy implications are significant. Non-custodial tools are often the only way for users to maintain financial privacy in a transparent blockchain environment. Without these tools, users are vulnerable to "doxing" and surveillance. Lewellen’s brief argues that by targeting the developers of these tools, the government is effectively eliminating the possibility of financial privacy for law-abiding citizens, a move that touches on Fourth Amendment concerns regarding unreasonable searches and seizures of financial data.

Official Responses and Industry Reactions

The Department of Justice has historically maintained that its prosecutions are not aimed at "code" but at "conduct." In previous statements regarding the Tornado Cash case, DOJ officials argued that when developers profit from a system that facilitates illicit finance, they are no longer merely "publishing code" but are operating a business that must comply with the Bank Secrecy Act (BSA).

However, the industry response to the Lewellen brief has been overwhelmingly supportive. Groups such as the Electronic Frontier Foundation (EFF) and the DeFi Education Fund have long argued that the government is overreaching. "If the government can turn a software developer into a regulated financial institution simply because they wrote a program that moves bits and bytes, then no developer is safe," said a spokesperson for a leading digital rights advocacy group.

SEC Commissioner Hester Peirce, known for her "Crypto Mom" moniker due to her supportive stance on innovation, is quoted in the brief. She has previously emphasized that "publishing code is speech," and that regulatory frameworks must be adapted to recognize the unique nature of decentralized technology rather than forcing it into 20th-century definitions of "intermediaries."

Analysis of Potential Outcomes and Implications

The Fifth Circuit’s decision in this case will likely have one of three major outcomes, each with profound consequences for the American tech industry:

1. A Ruling for Lewellen: If the court grants the pre-enforcement judgment and agrees that non-custodial development is not money transmission, it would provide a massive boost to the U.S. DeFi sector. It would establish a "First Amendment shield" for developers, ensuring that as long as they do not take control of user funds, they are not subject to the onerous requirements of the Bank Secrecy Act.
2. A Procedural Dismissal: The court could rule that Lewellen lacks "standing" because he hasn’t been indicted yet, or that the issue is not "ripe" for judicial review. This would be a blow to the community, as it would leave the "chilling effect" intact and force developers to continue operating in a state of fear until a high-profile trial provides a verdict.
3. A Ruling for the Government: If the court sides with the DOJ, it would codify the idea that software developers can be held liable for the "function" of their code. This would likely lead to a mass exodus of open-source financial projects from the U.S., as the compliance costs for a single developer to act as a "money transmitter" (which includes maintaining anti-money laundering programs and registering with FinCEN) are prohibitively high.

Conclusion: A Nation of Laws

As the brief concludes, the case is fundamentally about whether the United States will remain a "nation of laws, not of men." Lewellen and his supporters at Coin Center argue that the current administration’s reliance on prosecutorial discretion and non-binding memos is an insufficient substitute for clear, constitutional law.

The outcome in the Fifth Circuit will serve as a bellwether for the future of the internet’s financial layer. At stake is not just the career of one developer or the success of a specific crowdfunding tool, but the fundamental right of Americans to write, publish, and use technology that protects their privacy and autonomy without the looming threat of federal imprisonment. As the legal community awaits the government’s response to Lewellen’s opening brief, the tension between national security, financial regulation, and the First Amendment has never been more palpable.