A Texas federal court has dismissed a lawsuit filed by Michael Lewellen, a crypto developer seeking legal clarity for his donation-focused software, Pharos. The case, heard by Chief U.S. District Judge Reed O’Connor, centred on whether Lewellen could face prosecution under money transmission laws.
Disappointed to see the court dismiss my suit today. A non-binding DoJ memo is no substitute for real legal certainty.
My lawyers are exploring all options for a path forward. Huge thanks to the @coincenter team for their incredible support and expertise through this.
We need… https://t.co/uXJqGww7IO
— Michael Lewellen (@LewellenMichael) March 25, 2026
Judge rules no immediate threat, but debate over developer liability deepens
In his ruling on Wednesday, Judge O’Connor found that Lewellen failed to demonstrate a “credible threat of imminent prosecution,” effectively ending the case for now. Lewellen had sought a declaratory judgment to confirm that his non-custodial software designed to facilitate charitable crowdfunding would not expose him to criminal liability.
Reacting to the decision, Lewellen expressed disappointment, arguing that the lack of judicial clarity leaves developers in a precarious position. The court also referenced a recent Department of Justice memo suggesting prosecutors will not target crypto platforms for user actions or unintentional regulatory breaches. However, Lewellen dismissed this as insufficient, noting that such guidance is “no substitute for real legal certainty.”
Past prosecutions continue to cast a shadow
Lewellen’s concerns are rooted in recent high-profile cases involving crypto developers. He pointed to prosecutions linked to Tornado Cash and Samourai Wallet as evidence that developers remain at risk. Notably, Roman Storm was convicted for operating an unlicensed money-transmitting business, alongside similar charges faced by Samourai Wallet’s founders.
Judge O’Connor, however, distinguished those cases, emphasizing that they involved money laundering activities. In contrast, Lewellen’s software is intended for legitimate use, with no indication of knowingly facilitating illicit transactions.
Despite the dismissal, the case may not be over. The ruling was issued without prejudice, allowing Lewellen to refile if he can address the court’s concerns. Meanwhile, advocacy group Coin Center continues to push for legislative clarity.
Both Lewellen and Coin Centre’s executive director, Peter Van Valkenburgh, are urging lawmakers to pass the Blockchain Regulatory Certainty Act of 2026, introduced by Cynthia Lummis in 2025. The bill aims to protect developers and providers of non-custodial software who do not control user funds from being classified as money transmitters.
For now, developers remain caught between evolving enforcement signals and the absence of definitive legal protections.
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