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 marks a critical juncture in the ongoing battle between decentralized technology innovators and federal law enforcement agencies. Lewellen’s suit seeks a pre-enforcement judgment to determine whether the act of publishing, maintaining, and marketing non-custodial software constitutes a violation of federal money transmission laws. Supported by the cryptocurrency advocacy group Coin Center, the case argues that the current prosecutorial climate has created a "chilling effect" that threatens the constitutional rights of developers and the future of open-source innovation.
The Core of the Legal Dispute: 18 U.S.C. § 1960
At the heart of Lewellen’s legal challenge is 18 U.S.C. § 1960, a federal statute that criminalizes the operation of an "unlicensed money transmitting business." Historically, this law was utilized to target shadow banking operations, underground hawala networks, and traditional money launderers who moved physical or electronic currency without proper state or federal registration. However, in recent years, the Department of Justice (DOJ), particularly through the Southern District of New York (SDNY), has expanded its interpretation of this statute to include developers of decentralized protocols and privacy-enhancing software.
Lewellen, a developer of non-custodial crowdfunding software, argues that his work is fundamentally different from traditional money transmission. In a non-custodial model, the developer provides the code—the "tools"—but never takes possession, custody, or control of the users’ funds. The user interacts directly with a blockchain or a decentralized network. Lewellen contends that by treating the mere act of writing and publishing this code as a financial service, the government is overstepping its statutory authority and infringing upon protected speech.
The Shadow of Tornado Cash and Samourai Wallet
The urgency of Lewellen’s filing is driven by a series of high-profile prosecutions that have sent shockwaves through the global developer community. The most notable among these are the cases against the creators of Tornado Cash and Samourai Wallet.
In the Tornado Cash case, the DOJ alleged that the developers were responsible for the illicit funds that passed through the privacy protocol, despite the developers not having control over the smart contracts once they were deployed to the Ethereum blockchain. Similarly, the founders of Samourai Wallet were charged with operating an unlicensed money transmitting business for providing software that allowed users to obfuscate their transaction history.
These cases represent a paradigm shift in federal enforcement. Previously, the Financial Crimes Enforcement Network (FinCEN) guidance from 2013 and 2019 suggested that "software providers" who do not accept and transmit value were not considered money transmitters. The recent pivot by the SDNY to prosecute developers regardless of custody has created a "credible threat" of felony charges for anyone working on similar technologies. Lewellen’s brief argues that he should not have to "bet the farm" by continuing his work and risking a decades-long prison sentence just to find out if his interpretation of the law is correct.
A Chronology of Regulatory Shift
The tension between the crypto industry and federal regulators has been building for over a decade. A timeline of these developments illustrates the narrowing path for developers:
- March 2013: FinCEN issues its first major guidance on virtual currencies, distinguishing between "users," "administrators," and "exchangers." It notes that providers of anonymizing software are generally not money transmitters.
- May 2019: FinCEN clarifies that "un-hosted" or "non-custodial" wallet providers are not subject to the Bank Secrecy Act (BSA) requirements because they do not exercise "total control" over the value.
- August 2022: The U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctions the Tornado Cash smart contracts, the first time a piece of code rather than a person or entity was added to the SDN list.
- August 2023: Roman Storm, a co-founder of Tornado Cash, is indicted in the SDNY on charges including conspiracy to operate an unlicensed money transmitting business.
- April 2024: The founders of Samourai Wallet are arrested and charged under 18 U.S.C. § 1960.
- July 2026: Michael Lewellen files his opening brief in the Fifth Circuit, seeking clarity for all non-custodial software developers.
The Constitutional Arguments: Code as Speech
The most profound aspect of Lewellen’s brief is the assertion that software development is a form of expression protected by the First Amendment. This argument draws on a long-standing legal precedent established during the "Crypto Wars" of the 1990s. In the landmark case Bernstein v. Department of Justice, the Ninth Circuit ruled that computer source code is speech.
Lewellen’s brief quotes SEC Commissioner Hester Peirce, a frequent critic of "regulation by enforcement," who has stated, "Publishing code is speech, which the First Amendment protects." By threatening developers with prosecution for the act of publishing code, the government is effectively imposing a prior restraint on speech.
Furthermore, the brief invokes the Due Process Clause of the Fifth Amendment. Lewellen argues that the current application of 18 U.S.C. § 1960 is unconstitutionally vague. Under the "void for vagueness" doctrine, a law is unconstitutional if it does not provide a person of ordinary intelligence fair notice of what is prohibited. Because the DOJ’s current stance contradicts previous FinCEN guidance and the plain language of the statute (which implies "transmission" requires control of funds), developers are left in a state of legal limbo.
The Insufficiency of the "Blanche Memo"
The government has attempted to downplay the concerns of the developer community through administrative memos and public statements. The "Blanche Memo," a document often cited by the administration, provides internal guidance on prosecutorial discretion, suggesting that the DOJ is not interested in targeting "pure" software developers.
However, Lewellen’s brief dismisses these assurances as "woefully inadequate." The brief argues that a memo is not a law and can be rescinded or ignored by any individual prosecutor. It characterizes the government’s position as asking citizens to rely on "noblesse oblige"—the benevolence of those in power—rather than the certainty of the rule of law. As the brief states, "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."
Industry Reactions and Expert Perspectives
The crypto and privacy advocacy sectors have rallied behind Lewellen. Peter Van Valkenburgh, Director of Research at Coin Center, has highlighted that this case is not just about one developer, but about the fundamental architecture of the internet. If the government can criminalize the publishing of code that facilitates financial transactions, they could theoretically criminalize the publishing of any code that facilitates communication, file sharing, or data encryption.
Legal experts have noted that the Fifth Circuit is a strategic venue for this challenge. Known for its rigorous defense of individual liberties and its willingness to check executive overreach, the court may be more receptive to Lewellen’s arguments than the courts in the Second Circuit (where the SDNY cases are being tried).
"The government is attempting to expand a 20th-century anti-money laundering statute to cover 21st-century speech," said one legal analyst following the case. "If Lewellen wins, it provides a safe harbor for the entire open-source community. If he loses, the United States risks a massive ‘brain drain’ as developers move to jurisdictions with more favorable legal frameworks."
Broader Implications and Future Outlook
The outcome of Lewellen v. Department of Justice will have far-reaching implications for several key areas:
- User Privacy: Privacy-preserving technologies rely on decentralized, non-custodial code. If developers are prohibited from creating these tools, the average citizen loses the ability to protect their financial data from hackers, corporate surveillance, and state overreach.
- American Innovation: The U.S. has long been the hub for software development. A hostile legal environment could push the next generation of financial technology (DeFi) and privacy tech to Europe, Asia, or decentralized hubs.
- The Definition of a "Financial Institution": A ruling in favor of the DOJ would effectively expand the definition of a financial institution to include anyone with a keyboard and an internet connection. This would impose impossible compliance burdens on individual hobbyists and small-scale developers.
As the Fifth Circuit prepares to hear the case, the eyes of the tech world are on Michael Lewellen. His call for a pre-enforcement judgment is a demand for a return to the principle articulated by John Adams: that we are a nation of laws, not of men. For Lewellen and the thousands of developers he represents, the right to write code and the right to privacy are two sides of the same coin—one that the U.S. legal system must now decide whether to protect or prosecute.
