In a legal move that could redefine the boundaries of software development and financial regulation in the United States, software developer Michael Lewellen has filed his opening brief in the U.S. Court of Appeals for the Fifth Circuit. The filing seeks a pre-enforcement judgment regarding the application of federal money transmission laws to non-custodial software. Lewellen argues that the current prosecutorial environment, spearheaded by the Department of Justice (DOJ), creates a credible threat of felony charges for developers who write and publish open-source code. This case, supported by the non-profit advocacy group Coin Center, centers on whether 18 U.S.C. § 1960—the federal statute governing unlicensed money transmitting businesses—can be constitutionally applied to individuals who merely provide the tools for financial transactions without ever taking control of user funds.

The core of Lewellen’s argument rests on the distinction between custodial and non-custodial services. While traditional money transmitters like banks or Western Union take physical or digital possession of a customer’s money to facilitate a transfer, non-custodial software allows users to interact directly with decentralized networks. Lewellen asserts that by publishing crowdfunding software that does not grant him control over the assets, he is engaging in protected speech rather than financial conduct. The brief contends that the lack of legal clarity has created a "chilling effect" so severe that it threatens to stifle American innovation and drive the development of privacy-preserving technologies offshore.

The Legal Foundation: 18 U.S.C. § 1960 and the Definition of Money Transmission

At the heart of the dispute is 18 U.S.C. § 1960, a statute that makes it a federal felony to conduct, control, manage, supervise, direct, or own all or part of an unlicensed money transmitting business. Historically, this law was designed to prevent money laundering and ensure that financial intermediaries complied with the Bank Secrecy Act (BSA). However, the definition of a "money transmitter" has become a battleground in the digital age.

The Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department, issued guidance in 2013 and 2019 suggesting that an individual must have "total independent control" over the value being moved to be considered a money transmitter. For years, the cryptocurrency industry operated under the assumption that developers of non-custodial wallets or smart contracts were exempt from these regulations. This changed significantly with recent high-profile prosecutions in the Southern District of New York (SDNY).

The cases against the founders of Tornado Cash and Samourai Wallet have sent shockwaves through the developer community. In these instances, the DOJ argued that providing the infrastructure and maintaining the code for privacy-enhancing tools constitutes money transmission, even if the developers do not hold user private keys or manage the funds. Lewellen’s brief argues that these prosecutions represent a radical departure from established administrative guidance and the statutory language of Section 1960.

Chronology of the Regulatory Shift and Lewellen’s Challenge

The trajectory of the current legal conflict can be traced back over a decade, marked by a tightening of the regulatory knot around decentralized finance (DeFi).

• 2013: FinCEN issues its first major guidance on virtual currencies, stating that software developers are generally not money transmitters unless they also engage in the business of accepting and transmitting value.
• 2019: FinCEN reaffirms that "an anonymizing software provider is not a money transmitter" if they only provide the tool and do not engage in the transmission of value.
• August 2022: The U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctions the Tornado Cash smart contract addresses, marking the first time a piece of code, rather than a person or entity, is placed on the Specially Designated Nationals (SDN) list.
• August 2023: The DOJ indicts the founders of Tornado Cash, Roman Storm and Roman Semenov, charging them with conspiracy to commit money laundering and operating an unlicensed money transmitting business.
• April 2024: The founders of Samourai Wallet are arrested and charged with similar offenses, with the DOJ specifically targeting the "mixing" functionality of their non-custodial software.
• 2025-2026: In response to these actions, Michael Lewellen initiates his pre-enforcement challenge. Following lower court proceedings, the case moves to the Fifth Circuit in July 2026, where Lewellen files the current opening brief.

Lewellen’s timeline highlights a growing gap between the written guidance of regulatory bureaus and the actual enforcement actions of the DOJ. This discrepancy is what Lewellen calls a "bet the farm" scenario, where developers must choose between abandoning their work or risking decades in federal prison.

The Constitutional Stakes: First and Fifth Amendment Protections

Lewellen’s brief relies heavily on two pillars of the U.S. Constitution: the First Amendment right to free speech and the Fifth Amendment right to due process.

The argument that "code is speech" has significant legal precedent, most notably in the 1990s "Crypto Wars." In Bernstein v. Department of Justice, the Ninth Circuit ruled that software source code is a form of expression protected by the First Amendment. Lewellen contends that by writing and publishing his crowdfunding software, he is expressing ideas and providing instructions in a specialized language. If the government can criminalize the mere act of publishing that code because it might be used for financial transactions, it constitutes a prior restraint on speech.

Furthermore, the brief cites SEC Commissioner Hester Peirce, who has frequently argued that the act of publishing code should be shielded from aggressive regulatory overreach. Peirce’s stance reflects a broader concern that the government is attempting to regulate the "printing press" rather than the "content" of the financial activity.

Regarding the Fifth Amendment, Lewellen argues that the current application of Section 1960 is unconstitutionally vague. Due process requires that a law give a person of ordinary intelligence fair notice of what is prohibited. Lewellen asserts that because the DOJ has refused to clearly state that non-custodial software development is legal—and has indeed prosecuted developers in similar positions—the law fails to provide the necessary clarity. This vagueness allows for "arbitrary and discriminatory enforcement," a hallmark of due process violations.

Analysis of the "Blanche Memo" and Administrative Discretion

A significant portion of the brief addresses the so-called "Blanche Memo," an internal administration document that reportedly offered guidance on prioritizing prosecutions. While the memo suggested a more lenient approach toward developers who do not exercise control over funds, Lewellen’s legal team argues that it is woefully inadequate for providing legal certainty.

The brief notes that administrative memos are not binding law. They can be rescinded at any time by a change in leadership or a shift in political winds. Lewellen argues that law-abiding citizens should not have to rely on "prosecutorial discretion" or the "noblesse oblige" of powerful government officials to ensure their liberty. Without a court ruling that clarifies the limits of Section 1960, developers remain at the mercy of whichever interpretation the DOJ chooses to favor at a given moment.

This reliance on discretion rather than the rule of law is, according to Lewellen, an affront to the principles laid out by the Founding Fathers. The brief quotes John Adams, emphasizing that the United States is meant to be a "nation of laws, not of men." By seeking a pre-enforcement judgment, Lewellen is asking the court to reaffirm that the law itself, not the temporary policy of an administration, must dictate what is and is not a crime.

Supporting Data: The Economic and Privacy Impact

The chilling effect described in the brief is not merely theoretical; it has measurable implications for the U.S. technology sector. Data from industry reports suggests a significant migration of blockchain developers and capital away from the United States and toward jurisdictions with more predictable regulatory frameworks, such as Switzerland, Singapore, and parts of the European Union under the MiCA (Markets in Crypto-Assets) regulation.

According to a 2025 developer survey by Electric Capital, the U.S. share of the global blockchain developer workforce has seen a steady decline since the 2022 Tornado Cash sanctions. Developers cite the fear of legal liability as the primary reason for relocating or pivoting away from privacy-focused projects. This "brain drain" threatens American leadership in the next generation of internet infrastructure.

Moreover, the privacy implications are profound. Non-custodial software is often the only way for users to maintain financial privacy in an increasingly digitized and surveilled world. If developers are deterred from building these tools, users are forced into custodial systems where their data is centralized, harvested, and vulnerable to breaches. Lewellen’s brief argues that the government’s attempt to classify all privacy-enhancing software as "money transmission" is effectively an attempt to outlaw financial privacy itself.

Broader Implications and Potential Outcomes

The Fifth Circuit’s decision in Lewellen v. Department of Justice will likely have far-reaching consequences for the entire tech industry, not just the cryptocurrency sector. If the court rules in favor of Lewellen, it would establish a vital precedent protecting the act of publishing open-source code from being categorized as a regulated financial activity. This would provide a "safe harbor" for innovation, ensuring that tool-builders are not held liable for the actions of those who use their tools.

Conversely, a ruling in favor of the government could embolden the DOJ to expand its definition of money transmission even further. It could potentially reach into other areas of software, such as encrypted messaging apps that integrate payment features or decentralized social media platforms.

The case also touches on the "Major Questions Doctrine," a legal principle that suggests administrative agencies cannot make decisions of vast economic and political significance without clear authorization from Congress. Lewellen argues that by effectively rewriting Section 1960 to include software developers, the executive branch is usurping the legislative power of Congress.

Conclusion: The Path Forward for the Rule of Law

As the Fifth Circuit prepares to hear the arguments, the eyes of the global technology community are on Michael Lewellen. His request for a pre-enforcement judgment is a demand for the fundamental right to know the law before being accused of breaking it. The brief concludes with a call for the judiciary to fulfill its role as a check on executive overreach, ensuring that the development of new technology does not come at the cost of constitutional rights.

The outcome of this case will determine whether the United States remains a hospitable environment for the creators of decentralized technology or whether the "chilling effect" of aggressive prosecution will freeze out the next era of digital innovation. For Lewellen and the advocates at Coin Center, the fight is about more than just crypto; it is about the enduring principle that in a free society, the act of writing and sharing information should never be a crime.