US court rejects crypto developer legal shield bid

A US court has dismissed a lawsuit by crypto developer Michael Lewellen seeking legal protection for his software from money transmitter laws, ruling there was no credible threat of prosecution.

Chief US District Judge Reed O’Connor said Lewellen failed to demonstrate that enforcement action against his platform, Pharos, was imminent.

“A non-binding DoJ memo is no substitute for real legal certainty,”

Lewellen said following the decision.

The case centred on whether developers of non-custodial software could be held liable under money transmission laws, an issue raised after prosecutions tied to projects like Tornado Cash and Samourai Wallet.

The court distinguished those cases, noting they involved money laundering, while Lewellen’s software was intended for lawful use in charitable crowdfunding.

The dismissal was issued without prejudice, meaning Lewellen can refile the case with modifications as his legal team explores next steps.

The outcome has renewed calls for legislative clarity, with industry advocates urging passage of the Blockchain Regulatory Certainty Act to define the legal boundaries for crypto developers.