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Michael Lewellen, a crypto developer and advocate for blockchain innovation, has launched a legal battle against the U.S. Department of Justice (DOJ), filing a lawsuit in a Texas federal court. The case, dubbed the “Crypto Software Lawsuit,” seeks to establish the legality of his proposed crypto software, Pharos, while also preventing potential prosecution under money-transmitting laws.
The suit, filed on January 16, targets Attorney General Merrick Garland, accusing the DOJ of overstepping its constitutional authority by applying outdated laws to innovative blockchain technology. Lewellen, supported by crypto advocacy group Coin Center, aims to protect developers’ rights and set a legal precedent for blockchain projects across the U.S.
“The DOJ’s broad interpretation of money transmission laws threatens the ability to build freely,” Lewellen said in a statement posted to X (formerly Twitter). “This isn’t just about Pharos; it’s about the future of cryptocurrency innovation in America.”
Lewellen’s proposed software, Pharos, is a non-custodial protocol designed for crowdfunding campaigns. Non-custodial software allows users to retain complete control of their funds, with developers having no access or authority over the transactions. However, Lewellen claims that the DOJ has mischaracterized similar technologies as unlicensed money-transmitting businesses.
“The problem? The federal government has begun criminally prosecuting people for publishing similar cryptocurrency software, calling it unlicensed ‘money transmitting,’” reads the complaint.
In his lawsuit, Lewellen argues that the DOJ’s interpretation violates the First Amendment, which protects free speech, and the Fifth Amendment, which limits government overreach in criminal cases.
Lewellen’s lawsuit is the latest in a series of legal battles stemming from what the crypto industry perceives as regulatory overreach. Recent high-profile cases against developers of crypto mixers, such as Tornado Cash’s Roman Storm and Samourai Wallet’s Keonne Rodriguez, have raised alarm among developers and innovators. Both were charged with operating unlicensed money-transmitting businesses and money laundering, creating fear within the developer community.
“The government’s actions against Tornado Cash and other developers have created a chilling effect on the crypto industry,” said Peter Van Valkenburgh, Director of Research at Coin Center. “Lewellen’s case is about ensuring developers are not wrongfully targeted for simply writing and publishing code.”
Lewellen’s legal team emphasizes that publishing non-custodial software does not equate to controlling or transmitting funds. “Money transmission requires control over the money being moved, which is not present when someone publishes non-custodial software like Lewellen’s,” the complaint states.
Lewellen’s lawsuit isn’t just about Pharos; it represents a larger push for clear and fair regulations in the crypto space. He has requested the court to declare that his project does not violate existing money-transmitting laws. Additionally, Lewellen seeks a permanent injunction to prevent the DOJ from prosecuting him under those laws.
Coin Center, which has long advocated for blockchain-friendly policies, is fully backing Lewellen’s efforts. “This Crypto Software Lawsuit is critical for ensuring that developers have the freedom to innovate without fear of prosecution,” said Jerry Brito, Executive Director of Coin Center.
Lewellen’s case echoes a growing trend of preemptive lawsuits filed by crypto companies seeking regulatory clarity. Last year, Ethereum software development firm Consensys sued the Securities and Exchange Commission (SEC), asking a court to rule that Ether is not a security. The case was dismissed, but it underscored the industry’s frustration with outdated regulations.
Similarly, startups like Beba and Lejilex have challenged the SEC’s authority, arguing that their tokens or exchanges do not violate securities laws. These cases highlight the ongoing tension between innovative blockchain projects and legacy regulatory frameworks.
Lewellen’s lawsuit comes at a pivotal moment for U.S. regulatory leadership. Attorney General Merrick Garland is preparing to step down as President-elect Donald Trump prepares to re-enter the White House. Trump’s nominee for Attorney General, Pam Bondi, is currently undergoing congressional confirmation hearings. The outcome of this transition could shape the DOJ’s stance on blockchain technologies and influence the Crypto Software Lawsuit.
The crypto community has rallied behind Lewellen, viewing his case as a stand against government overreach. “This lawsuit is not just about one developer; it’s about safeguarding the future of open-source innovation,” said Jake Chervinsky, Chief Legal Officer at the Blockchain Association.
Others see the case as a litmus test for how the U.S. will treat blockchain developers in the years to come. “The Crypto Software Lawsuit could set a powerful precedent,” said Kristin Smith, Executive Director of the Blockchain Association. “If developers are criminalized for publishing code, it could stifle the entire industry.”
As the case unfolds, its implications could ripple across the blockchain landscape. If successful, Lewellen’s lawsuit could shield developers from unjust prosecution and encourage innovation in the U.S. crypto industry.
For now, all eyes are on the Texas federal court, where the Crypto Software Lawsuit is set to play out.
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