Michael Lewellen, a crypto advocate and developer, has filed a lawsuit against US Attorney General Merrick Garland, asking a Texas federal court to declare his crypto software legal and block any potential prosecution from the Department of Justice (DOJ).
Lewellen, a fellow at the crypto advocacy organization Coin Center, filed the lawsuit on January 16, 2025, in connection to his planned release of a non-custodial cryptocurrency software called Pharos. The software is designed to facilitate crowdfunding campaigns.
Legal Dispute Over Crypto Software
The lawsuit stems from growing concerns within the cryptocurrency community about the DOJ’s interpretation of federal money-transmitting laws. According to the complaint, the DOJ has begun prosecuting developers of similar crypto software under accusations of operating unlicensed “money-transmitting” businesses.
“The federal government has started treating the publication of cryptocurrency software as a criminal act, which infringes on constitutional rights,” the complaint reads. Lewellen argues that the DOJ’s interpretation of these laws oversteps constitutional limits, violating the First Amendment’s protection of free speech and the Fifth Amendment’s safeguards against government overreach.
Coin Center, an influential crypto policy group, is backing Lewellen in this case, which arrives amid heightened scrutiny of developers within the crypto space.
A Broader Industry Concern
The complaint draws attention to recent high-profile cases, such as the DOJ’s charges against Roman Storm, founder of Tornado Cash, and Keonne Rodriguez, co-founder of Samourai Wallet. Both individuals were accused of running unlicensed money-transmitting businesses and engaging in money laundering via crypto mixers.
However, Lewellen’s legal team asserts that his software, Pharos, operates differently. Unlike custodial services that handle users’ funds directly, Pharos is designed as a non-custodial platform, meaning users maintain control of their assets. The lawsuit emphasizes that “money transmission requires control over the funds being moved, which is absent in non-custodial software like Lewellen’s.”
Lewellen took to social media to underscore the broader implications of his case, writing, “The DOJ’s broad interpretation of money transmission laws threatens the ability to innovate freely. This isn’t just about Pharos; it’s about the future of cryptocurrency development in the United States.”
Seeking Legal Protection
Through the lawsuit, Lewellen is asking the court to officially determine that his software does not violate money-transmitting laws. Additionally, he seeks an injunction preventing the DOJ from prosecuting him under these laws, reimbursement for his legal fees, and any further relief deemed appropriate by the court.
This preemptive legal strategy mirrors other cases in which crypto companies sought clarification from courts regarding regulatory gray areas.
Previous Cases in the Crypto Industry
Similar lawsuits have been filed in the past by crypto industry players seeking to ensure compliance with regulations:
• In April 2024, Consensys, a blockchain development firm, sued the Securities and Exchange Commission (SEC), asking a court to rule that Ether is not a security. The case was dismissed later that year.
• In March 2024, clothing brand Beba sued the SEC to declare its token, distributed as part of a giveaway, was not a security. The SEC filed a motion to dismiss in November.
• In February 2024, crypto startup Lejilex pursued a lawsuit against the SEC to confirm its planned crypto exchange would comply with securities laws. The SEC sought to dismiss the case in October.
A Shifting Regulatory Landscape
Lewellen’s lawsuit arrives at a time of change in the federal government, with Attorney General Merrick Garland preparing to step down as President-elect Donald Trump re-enters the White House. Trump’s nominee for Attorney General, Pam Bondi, is currently undergoing confirmation hearings.
This case highlights the ongoing tension between the fast-moving crypto industry and regulatory frameworks that many argue are ill-equipped to address its complexities. If successful, Lewellen’s legal action could set a precedent for how crypto software is regulated and pave the way for clearer guidelines in the United States.
