Federal Judge Tosses Crypto Developer's Preemptive Suit Over Money Transmitter Laws - Unchained

A federal judge in Texas has dismissed a lawsuit by crypto developer Michael Lewellen that sought to establish, preemptively, that his non-custodial donation software wouldn’t run afoul of federal money transmitter laws. Chief U.S. District Judge Reed O’Connor ruled Wednesday that Lewellen — a fellow at crypto advocacy group Coin Center — failed to show a credible threat of imminent prosecution, pulling the rug out from under a case the industry had rallied behind.

Lewellen had pointed to the convictions of Tornado Cash co-founder Roman Storm and the Samourai Wallet developers as proof that builders of non-custodial tools face genuine legal peril. But the judge drew a sharp line: those cases centered on money laundering, not simply operating a business. The court also leaned on a 2025 DOJ memo from Deputy AG Todd Blanche stating prosecutors wouldn’t target crypto tools for their users’ behavior — a memo Lewellen called “no substitute for real legal certainty.”

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The dismissal came without prejudice, leaving the door open for Lewellen to refile. But the ruling underscores a frustrating legal limbo for DeFi developers: the court declined to say whether non-custodial software actually falls under money transmitter statutes, while simultaneously using a revocable DOJ memo to argue the threat isn’t real enough to rule on. Coin Center’s Peter Van Valkenburgh and Lewellen are now pushing Congress to pass the Blockchain Regulatory Certainty Act of 2026, introduced by Senator Cynthia Lummis in January, which would explicitly exempt non-custodial developers from money transmitter requirements.