The case emerges at a time of unprecedented tension between the U.S. Department of Justice (DOJ) and the decentralized finance (DeFi) sector. By filing this brief, Lewellen aims to secure a ruling on the merits regarding the limits of federal prosecutorial power, arguing that the current climate of "regulation by enforcement" creates a "chilling effect" that stifles innovation and violates constitutional protections regarding speech and due process. The outcome of this case could define the legal landscape for American software developers for decades, determining whether writing and publishing code is a protected act of expression or a regulated financial activity.
The Legal Foundation: 18 U.S.C. § 1960 and the Money Laundering Control Act
At the heart of the dispute is 18 U.S.C. § 1960, which makes it a federal felony to conduct, control, manage, supervise, direct, or own all or part of an "unlicensed money transmitting business." Historically, this statute was applied to traditional financial intermediaries—entities like Western Union or informal "hawala" networks—that take physical or digital custody of a customer’s funds and move them to a third party.
However, recent prosecutions by the Southern District of New York (SDNY) have expanded the application of this law to include developers of non-custodial software. Non-custodial software refers to tools where the developer never takes possession of the user’s private keys or funds. Instead, the software provides the instructions for the user to interact directly with a blockchain. Lewellen’s brief argues that the DOJ’s current interpretation collapses the distinction between "providing a service" and "publishing a tool."
If the government’s theory holds, any individual who writes code that facilitates the movement of value could be classified as a "money transmitter," even if they have no control over the transactions, no relationship with the users, and no ability to stop the software once it is deployed on a decentralized network.
The Catalyst: Tornado Cash and Samourai Wallet Prosecutions
Lewellen’s decision to seek a pre-enforcement judgment is directly linked to the high-profile criminal cases against the founders of Tornado Cash and Samourai Wallet. In the case of Tornado Cash, developer Roman Storm was indicted on charges including conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmitting business. The government alleges that because the Tornado Cash "privacy mixer" was used by illicit actors, including the North Korean Lazarus Group, the developers are responsible for the flow of those funds.
Similarly, the founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, were arrested in early 2024. The DOJ alleged that their non-custodial wallet software facilitated over $2 billion in unlawful transactions. These cases sent shockwaves through the developer community, as they marked a departure from previous Financial Crimes Enforcement Network (FinCEN) guidance, which had historically suggested that "software providers" who do not accept and transmit value are not money transmitters.
Michael Lewellen, who develops non-custodial crowdfunding software, argues in his brief that these prosecutions create a "credible threat" of imprisonment for his own work. He contends that his software, which allows users to pool funds for various projects without a central intermediary, could easily be recharacterized by federal prosecutors as an unlicensed money transmitting business under the same logic applied to Samourai Wallet.
A Chronology of Regulatory Shift and Legal Resistance
The shift in the U.S. government’s approach to software developers has evolved over the last decade, leading to the current legal impasse:
- 2013: FinCEN issues guidance stating that "users" and "software providers" are generally not considered Money Service Businesses (MSBs).
- 2019: FinCEN clarifies that "an anonymizing software provider is not a money transmitter," distinguishing between those who provide the tools and those who actually engage in the transmission.
- August 2022: The U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctions Tornado Cash smart contracts, the first time a piece of code, rather than an entity or person, is placed on a sanctions list.
- August 2023: The DOJ indicts Tornado Cash co-founders Roman Storm and Roman Semenov.
- April 2024: The DOJ arrests the founders of Samourai Wallet, further signaling an aggressive stance against non-custodial privacy tools.
- May 2024: The "Blanche Memo" (referring to internal DOJ policy discussions) suggests a possible pivot toward more nuanced enforcement, but the industry remains skeptical due to a lack of formal, binding commitments.
- July 2026: Michael Lewellen files his opening brief in the Fifth Circuit, demanding a clear legal boundary between software development and financial intermediation.
Constitutional Arguments: Speech, Privacy, and Due Process
The Lewellen brief rests on two primary constitutional pillars: the First Amendment and the Fifth Amendment.
The First Amendment: Code as Protected Speech
The brief cites the landmark 1990s case Bernstein v. Department of Justice, which established that computer source code is a form of speech protected by the First Amendment. Lewellen argues that publishing code is an expressive act—a way of communicating logic and instructions. By threatening developers with felony charges for the act of publishing open-source software, the government is engaging in a prior restraint on speech and creating a "chilling effect" that discourages others from speaking.
As SEC Commissioner Hester Peirce noted in statements cited within the brief, "Publishing code is speech." Lewellen argues that the government cannot bypass First Amendment protections simply by re-labeling speech as "conduct" or "business activity" when no custodial relationship exists between the developer and the user.
The Fifth Amendment: Due Process and the Rule of Lenity
The brief also raises due process concerns, arguing that the current application of 18 U.S.C. § 1960 is unconstitutionally vague. Under the Fifth Amendment, citizens have a right to know what the law prohibits before they are subjected to criminal penalties. Lewellen asserts that a reasonable developer, looking at existing FinCEN guidance and the text of the law, would not conclude that writing non-custodial code constitutes money transmission.
The "Rule of Lenity" is also invoked, a judicial doctrine stating that if a criminal statute is ambiguous, it should be interpreted in the way most favorable to the defendant. Lewellen argues that if the court finds the definition of "money transmitter" to be unclear in the context of software, it must rule in favor of the developer’s liberty.
Data and Economic Implications of Regulatory Uncertainty
The lack of clarity has tangible economic consequences for the United States. According to a 2023 report on the "Geography of Crypto," the U.S. share of the global developer workforce in the blockchain space has dropped from 40% in 2017 to approximately 28% today. Legal experts suggest this "brain drain" is a direct result of the aggressive prosecutorial environment.
Furthermore, the cost of compliance for startups is staggering. Obtaining money transmitter licenses in all 50 U.S. states can cost a company upwards of $2 million in legal fees and surety bonds, not including the ongoing costs of anti-money laundering (AML) monitoring. For an individual open-source developer like Lewellen, who does not charge fees or hold user funds, such a requirement is not only financially impossible but logically inapplicable.
Official Responses and the "Blanche Memo"
The administration has attempted to calm the industry through informal channels. The "Blanche memo," a policy document circulating within the DOJ, reportedly suggests that prosecutors should focus on entities that exercise "effective control" over funds. However, Lewellen’s brief argues that these internal memos are "woefully inadequate."
The brief states: "Law-abiding citizens like Lewellen who know the federal government thinks their protected conduct is illegal need not rely on mere prosecutorial discretion—leaving their liberty at the mercy of noblesse oblige." The argument is that the rights of citizens should be protected by the law and the courts, not by the shifting whims or "promises of powerful men" in the executive branch.
Broader Impact and Industry Implications
The Fifth Circuit’s decision in Lewellen v. United States (or the relevant government entity) will have far-reaching implications. If the court rules in Lewellen’s favor, it would create a safe harbor for developers of non-custodial software, ensuring that they cannot be prosecuted for the illicit use of their tools by third parties. This would stabilize the U.S. crypto industry and reaffirm the principle that tool-makers are not responsible for the actions of tool-users.
Conversely, a ruling in favor of the government could effectively ban the development of decentralized financial protocols within the United States. It would force developers to either implement centralized "backdoors" to monitor transactions—destroying the privacy and security benefits of the software—or cease operations entirely to avoid the risk of life-altering felony charges.
Conclusion: A Nation of Laws, Not Men
The Lewellen brief concludes with a powerful appeal to the foundational principles of American jurisprudence. Citing John Adams’ famous declaration that the United States is "a nation of laws, not of men," the filing asserts that the current administration’s reliance on "prosecutorial discretion" rather than clear statutory limits is an affront to the rule of law.
As the Fifth Circuit begins its review, the case stands as a pivotal moment for the intersection of technology and the law. For Michael Lewellen and the thousands of developers he represents, the stakes are nothing less than the future of open-source innovation and the constitutional right to privacy in the digital age. The court’s ruling will determine whether the United States remains a hospitable environment for the next generation of software pioneers or if the fear of prosecution will drive the future of the internet to more favorable jurisdictions abroad.
