On July 2, 2026, software developer Michael Lewellen filed an opening brief in the U.S. Court of Appeals for the Fifth Circuit, marking a pivotal moment in the ongoing legal battle over the boundaries of software development, financial regulation, and constitutional rights. Lewellen is seeking a pre-enforcement judgment to clarify whether the act of writing and publishing non-custodial software constitutes "unlicensed money transmission" under federal law. Supported by the cryptocurrency advocacy group Coin Center, the case challenges the Department of Justice’s (DOJ) recent aggressive stance toward developers of privacy-preserving and decentralized financial tools.
The core of the legal dispute rests on 18 U.S.C. § 1960, a federal statute that criminalizes the operation of an unlicensed money transmitting business. For decades, this law was applied primarily to entities that took physical or digital custody of third-party funds, such as banks or traditional money transmitters. However, recent prosecutions in the Southern District of New York (SDNY) have expanded this interpretation to include developers of decentralized protocols who never hold or control user assets. Lewellen’s brief argues that this expansion creates a "chilling effect" that forces law-abiding developers to abandon their work or face the threat of life-altering felony charges.
The Legal Context: 18 U.S.C. § 1960 and the Shift in Prosecution
To understand the gravity of Lewellen’s filing, one must examine the evolution of money transmission laws in the United States. 18 U.S.C. § 1960 was designed to prevent the rise of underground banking systems that could be used for money laundering or financing illicit activities. Traditionally, the Financial Crimes Enforcement Network (FinCEN) has defined a money transmitter as someone who accepts currency or funds from one person and transmits them to another location or person by any means.
The critical distinction in previous decades was "custody." If a service provider held a user’s funds, they were a transmitter. If they merely provided the tools—such as a wallet software or a communication protocol—they were considered "exempt" or outside the scope of the law. This distinction allowed the early internet and the first decade of the cryptocurrency industry to flourish.
However, starting in late 2023 and accelerating through 2024 and 2025, the DOJ began a series of high-profile prosecutions that signaled a departure from this standard. The cases against the founders of Tornado Cash and Samourai Wallet served as the catalyst for Lewellen’s preemptive legal action. In those instances, the government argued that even though the developers did not have control over user funds, the mere act of creating and maintaining the software that facilitated private transactions made them "money transmitters."
The Case of Michael Lewellen: Crowdfunding and the Fear of Publication
Michael Lewellen is an independent software developer who has designed a non-custodial crowdfunding platform. Unlike traditional platforms like Kickstarter or GoFundMe, Lewellen’s software uses smart contracts to allow users to raise funds directly from contributors without an intermediary ever touching the money.
In his brief, Lewellen explains that while his software is ready for deployment, he has refrained from publishing, maintaining, or marketing it due to a "well-founded fear" of prosecution. He argues that under the current interpretation favored by the SDNY, his role as the author of the code could be misconstrued as operating an unlicensed money transmitting business.
The brief emphasizes that Lewellen is not a criminal seeking to evade the law, but a citizen seeking to follow it. By asking for a pre-enforcement judgment, he is requesting the court to rule on the legality of his actions before the government can initiate a criminal case. The brief famously quotes: “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.”
A Chronology of the "Chilling Effect" in Crypto Development
The path to the Fifth Circuit has been paved by a series of regulatory and legal escalations:
- August 2022: The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctions the Tornado Cash smart contracts, marking the first time a piece of autonomous code was placed on a sanctions list.
- August 2023: The DOJ indicts Tornado Cash founders Roman Storm and Roman Semenov, alleging conspiracy to commit money laundering and unlicensed money transmission.
- April 2024: The founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, are arrested and charged with operating an unlicensed money transmitting business. The government’s theory again focuses on the provision of privacy software.
- Late 2025: The "Blanche Memo" is circulated within the administration. While the memo suggested a more lenient approach toward developers, it lacked binding authority and failed to provide a concrete legal "safe harbor" for non-custodial software authors.
- July 2, 2026: Michael Lewellen files his opening brief in the Fifth Circuit, seeking a definitive ruling to protect the act of publishing code.
Constitutional Arguments: Code as Speech and Due Process
At the heart of Lewellen’s argument are the First and Fifth Amendments of the U.S. Constitution. The First Amendment protects the right to free speech, and for nearly thirty years, U.S. courts have recognized that computer source code is a form of speech. In the landmark 1990s case Bernstein v. Department of Justice, the court ruled that software code is a medium of expression used by scientists and mathematicians, and thus deserves constitutional protection.
Lewellen’s brief argues that by criminalizing the publication of software, the government is engaging in a "prior restraint" on speech. SEC Commissioner Hester Peirce has echoed this sentiment in several public dissents, stating, "Publishing code is speech, which the First Amendment protects." The brief asserts that if the government wishes to regulate the use of technology, it must do so without infringing on the right to write and share the underlying logic of that technology.
Furthermore, the Fifth Amendment ensures "Due Process," which requires that laws be clear enough for an ordinary person to understand what is prohibited. Lewellen argues that the current application of 18 U.S.C. § 1960 is unconstitutionally vague. If a developer cannot determine whether their project will land them in federal prison until after they are indicted, the law fails to provide the requisite notice required by the Constitution.
Official Responses and the "Noblesse Oblige" Problem
The federal government’s response to these concerns has been characterized by many in the tech industry as "unreliable." While some administration officials have issued statements suggesting that "pure" software development is not a target, the DOJ has repeatedly refused to issue formal guidance or admit in court that non-custodial development is legal.
Lewellen’s brief addresses this directly, criticizing the government’s reliance on "prosecutorial discretion." The brief argues that law-abiding citizens should not have to rely on the "mercy of noblesse oblige"—the idea that they are safe only as long as the current administration chooses not to prosecute them. As political winds shift, so too can the priorities of the DOJ, leaving developers in a state of permanent legal peril.
Coin Center, the leading non-profit research and advocacy group focused on the public policy issues facing cryptocurrency, has been a vocal supporter of Lewellen. Peter Van Valkenburgh, Coin Center’s Director of Research, noted that the current environment is the "number one U.S. policy threat" to innovation. According to Van Valkenburgh, the weaponization of money transmission laws does more than just stop crypto projects; it undermines the fundamental privacy rights of every American who uses digital tools.
Broader Implications for Privacy and Innovation
The outcome of Lewellen v. Department of Justice (or the corresponding federal entity) will have far-reaching consequences beyond the world of Bitcoin and Ethereum. If the Fifth Circuit rules in favor of Lewellen, it would establish a critical precedent protecting open-source developers from being held liable for how third parties use their tools.
Conversely, if the government’s broad interpretation of money transmission is upheld, it could signal the end of American leadership in decentralized technology. Developers might flee to jurisdictions with clearer legal frameworks, such as Switzerland or Singapore, leading to a "brain drain" of technical talent.
Moreover, the case touches on the fundamental right to privacy. Privacy-preserving software, like the tools Lewellen seeks to build, is essential for protecting individuals from surveillance and data breaches. By categorizing the creation of these tools as a financial crime, the government effectively restricts the public’s access to privacy-enhancing technologies.
Analysis: A Nation of Laws, Not of Men
The brief concludes by invoking the words of John Adams: "We are a nation of laws, not of men." This principle suggests that the legality of an action should be determined by clear, written statutes and judicial interpretations, rather than the whims or "promises" of powerful officials.
For developers like Michael Lewellen, the quest is for certainty. In a digital age where code runs the global economy, the distinction between "writing a program" and "conducting a financial transaction" must be clearly defined. The Fifth Circuit now faces the task of determining whether the First Amendment remains a robust shield for the architects of the digital frontier, or whether the government’s power to regulate money will expand to encompass the very act of creative expression through code.
As the legal community and the technology sector watch closely, the Lewellen brief stands as a definitive statement on the rights of the individual against the expansive reach of the modern regulatory state. The decision rendered in this case will likely define the landscape of American innovation for the next generation.
