In a significant legal maneuver 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 debate over whether the act of writing and publishing open-source code constitutes "money transmission" under federal law. Lewellen, a software developer, is seeking a pre-enforcement judgment to protect himself and other developers from the threat of felony prosecution under 18 U.S.C. § 1960, a statute that governs unlicensed money transmitting businesses.
Supported by the non-profit advocacy group Coin Center, Lewellen’s case argues that the current interpretation of money transmission laws by the Department of Justice (DOJ) creates a "chilling effect" on innovation, privacy, and free speech. The legal challenge highlights a growing rift between the developer community and federal prosecutors, particularly those in the Southern District of New York (SDNY), who have recently targeted creators of non-custodial privacy tools. At the heart of the matter is whether a developer can be held criminally liable for the use of their software by third parties, even when the developer never takes possession or control of the users’ funds.
The Core of the Legal Challenge: Code as Speech
Michael Lewellen is a developer who has created non-custodial crowdfunding software. Unlike traditional financial intermediaries, his tools are designed to allow individuals to interact directly with one another on a blockchain without a middleman. Crucially, Lewellen’s software is non-custodial, meaning he does not hold, manage, or move funds on behalf of his users. Instead, he provides the technical architecture—the code—that enables users to manage their own transactions.
Lewellen’s brief contends that the act of publishing this code is a form of speech protected by the First Amendment. This argument draws on a long line of legal precedents, most notably the 1990s "Crypto Wars" case Bernstein v. United States, which established that source code is a form of expression. By threatening to prosecute developers for "unlicensed money transmission," Lewellen argues, the government is effectively criminalizing the publication of mathematics and logic.
The brief also raises Fifth Amendment concerns regarding due process. Under the principle of "void for vagueness," a law must be clear enough for a person of ordinary intelligence to understand what conduct it prohibits. Lewellen argues that 18 U.S.C. § 1960 is being applied in an unpredictable and expansive manner that fails to provide developers with fair notice of their legal obligations.
Historical Context: The Shadow of Tornado Cash and Samourai Wallet
The urgency of Lewellen’s filing is driven by recent aggressive enforcement actions taken by the SDNY. Two specific cases have sent shockwaves through the global software development community: the prosecutions of the founders of Tornado Cash and Samourai Wallet.
Tornado Cash is a decentralized privacy protocol on the Ethereum blockchain. In 2023, the DOJ charged its developers, Roman Storm and Roman Semenov, with conspiracy to commit money laundering and operating an unlicensed money transmitting business. The government’s theory suggests that because the developers maintained the code and UI for the protocol, they were responsible for the illicit funds that moved through it, despite the protocol being autonomous and decentralized.
Similarly, in early 2024, the founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, were arrested on similar charges. Samourai Wallet is a non-custodial bitcoin wallet that offers privacy-enhancing features. The DOJ’s stance in these cases appears to be that providing the software used to facilitate private transactions is equivalent to being a "money transmitter," even if the provider never has the power to stop, start, or divert a user’s transaction.
For developers like Lewellen, these cases represent a fundamental shift in the government’s interpretation of the Bank Secrecy Act (BSA) and its implementing regulations. For over a decade, guidance from the Financial Crimes Enforcement Network (FinCEN) had suggested that "software providers" who do not accept and transmit value were not considered money transmitters. The recent shift toward criminalizing non-custodial development has created a climate of fear, prompting Lewellen to seek clarity from the court before he risks his own liberty.
The Failure of Administrative Promises: The Blanche Memo
In response to growing criticism from the tech industry and civil liberties groups, the current administration has made attempts to clarify its stance. One such attempt is the "Blanche memo," a document issued by the DOJ that provides some directional guidance on how money transmission laws should be applied to software developers.
However, Lewellen’s brief argues that these administrative gestures are "woefully inadequate." The Blanche memo is not a binding legal interpretation; it is a statement of policy that can be rescinded or ignored at any time by future administrations or even by individual prosecutors. Furthermore, the DOJ has repeatedly refused to explicitly state that the act of developing and publishing non-custodial software is, by definition, not a crime.
The brief emphasizes that law-abiding citizens should not have to rely on "prosecutorial discretion" or the "noblesse oblige" of government officials. In a nation governed by the rule of law, the limits of criminal liability must be defined by statutes and courts, not by the shifting whims of political appointees.
Timeline of Regulatory and Legal Developments
The path to Lewellen’s Fifth Circuit filing is marked by several years of escalating tension between the crypto industry and federal regulators:
- March 2013: FinCEN issues guidance stating that "users" of virtual currency are not money transmitters, but "exchangers" and "administrators" are.
- May 2019: FinCEN clarifies that "anonymizing software providers" are generally not money transmitters if they do not engage in the business of accepting and transmitting 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 autonomous code is placed on a sanctions list.
- August 2023: The DOJ indicts the founders of Tornado Cash, signaling a move toward criminalizing the development of privacy protocols.
- April 2024: The DOJ arrests the founders of Samourai Wallet, further expanding the definition of money transmission to include non-custodial wallet providers.
- July 2026: Michael Lewellen files his opening brief in the Fifth Circuit, seeking a pre-enforcement ruling to establish the legal limits of 18 U.S.C. § 1960.
Supporting Data and Industry Perspectives
The chilling effect described in Lewellen’s brief is backed by data showing a migration of developers and firms away from the United States. According to industry reports, the U.S. share of the global blockchain developer workforce has declined significantly over the last three years, as developers seek jurisdictions with clearer regulatory frameworks, such as Switzerland, Singapore, or the European Union (under the MiCA framework).
Legal experts have noted that the DOJ’s current approach contradicts decades of established financial law. Traditionally, a "money transmitter" is defined by the "four corners" of a transaction: the ability to receive, hold, and send funds. By removing the "custody" requirement, the DOJ is effectively turning every software engineer whose code touches a financial transaction into a regulated financial institution.
SEC Commissioner Hester Peirce, a frequent critic of "regulation by enforcement," has been a vocal advocate for the First Amendment rights of developers. As quoted in Lewellen’s brief, Peirce has stated that "publishing code is speech," and that the government must be careful not to trample on constitutional protections in its pursuit of financial oversight.
Broader Impact and Implications for Privacy
The outcome of Lewellen’s case will have profound implications for the future of the internet and personal privacy. If the court rules that writing code for non-custodial tools can be prosecuted as unlicensed money transmission, it could effectively ban the development of privacy-preserving technologies in the United States.
This would not only affect the cryptocurrency industry but could also set a precedent for other types of software. For example, developers of encrypted messaging apps or peer-to-peer file-sharing protocols could find themselves under similar scrutiny if their tools are used for illicit purposes.
Furthermore, the case touches on the fundamental right to financial privacy. In an increasingly digital world, the ability to transact without every detail being logged by a centralized intermediary is essential for political dissidents, journalists, and ordinary citizens concerned about data breaches and surveillance. By targeting the tools that enable privacy, the government is making it harder for individuals to exercise their constitutional rights.
Conclusion: A Nation of Laws, Not of Men
As the Fifth Circuit prepares to hear arguments, the legal community is watching closely. Lewellen’s request for a pre-enforcement judgment is a bold attempt to force the judiciary to do what the executive branch has refused to do: provide a clear, binding boundary for the law.
The case serves as a reminder of the warning issued by John Adams: that a free society must be a "government of laws and not of men." When the definition of a felony can change based on which prosecutor is in office, the rule of law is undermined. Developers like Lewellen are not asking for special treatment; they are asking for the certainty of law so they can continue to innovate without the threat of a prison sentence hanging over their heads.
The Fifth Circuit’s decision will likely be appealed, potentially reaching the Supreme Court. Regardless of the immediate outcome, the case of Lewellen v. United States stands as a landmark effort to defend the intersection of technology, speech, and the right to build a more private digital future.
