A Texas-based cryptocurrency developer, Michael Lewellen, is taking legal action against the U.S. Attorney General Merrick Garland in an effort to protect his non-custodial software, Pharos, from legal prosecution. Lewellen’s lawsuit, filed on January 16, 2025, in a Texas federal court, seeks a ruling that would declare his software legal and shield him from future legal action. The case has the potential to set an important precedent for cryptocurrency developers and the broader blockchain industry in the U.S.

Lewellen’s software, Pharos, is designed to facilitate crowdfunding campaigns using cryptocurrency, but its legal standing is now being challenged by the U.S. Department of Justice (DOJ). The DOJ has recently focused on prosecuting individuals who create or operate software like Pharos, accusing them of violating unlicensed money transmission laws.

The Lawsuit: A Fight for Innovation and Fairness

The crux of Lewellen’s lawsuit revolves around his claim that the DOJ’s broad interpretation of money-transmitting laws is unconstitutional. In the lawsuit, Lewellen argues that these laws, as applied to crypto developers, violate his First and Fifth Amendment rights. The First Amendment protects freedom of speech, and the Fifth Amendment limits the government’s power in criminal legal proceedings.

Lewellen’s software, Pharos, is non-custodial, meaning that it allows users to engage in cryptocurrency transactions without the developer or platform taking control of the funds. This is a key aspect of Lewellen’s defense. According to him, money transmission laws are meant to regulate entities that control or handle funds, but Pharos does not meet this definition. Instead, it is a platform that merely facilitates transactions, with users retaining full control over their funds.

“Pharos is about providing users with a way to interact with cryptocurrency in a secure, transparent way,” Lewellen said in a statement. “It’s not about controlling their money. The DOJ’s broad interpretation of the law could crush innovation in the crypto space.”

Growing Concerns in the Crypto Community

Lewellen’s case comes at a time of heightened concern among cryptocurrency developers, who fear the government’s increasing scrutiny could stifle innovation in the industry. Over the past few years, the DOJ has brought legal action against developers of crypto-related tools, such as mixers and privacy-focused wallets. These prosecutions are often based on accusations of illegal money transmission and, in some cases, money laundering.

However, Lewellen’s legal team argues that his software is fundamentally different from these services. For example, Pharos does not obscure the origin of funds or facilitate illicit activity. Instead, it allows individuals to use cryptocurrency for legitimate purposes, such as crowdfunding, without the software publisher gaining control over the funds.

The lawsuit’s core argument is that developers of non-custodial software should not be treated like traditional money transmitters because they are not involved in handling or controlling funds. According to Lewellen’s team, the DOJ’s aggressive stance on cryptocurrency could discourage developers from building innovative tools, ultimately slowing the growth of the crypto industry.

Coin Center Supports Lewellen’s Legal Fight

Lewellen is receiving support from Coin Center, a prominent cryptocurrency advocacy organization that is backing his lawsuit. Coin Center has long advocated for clearer, more balanced regulations in the cryptocurrency space. The organization believes that overreach by the DOJ could create a chilling effect, preventing developers from creating new tools that empower users while maintaining control over their own funds.

“We cannot allow the government to stifle innovation in blockchain technology,” said Jerry Brito, Executive Director of Coin Center. “This case is critical for the future of crypto development in the U.S. We support Michael Lewellen’s fight to ensure that developers are not unfairly penalized for creating non-custodial software.”

A Pivotal Moment for Crypto Development in the U.S.

Lewellen’s lawsuit seeks two main outcomes: first, that his software is officially declared not to violate money transmission laws, and second, that the DOJ be prevented from prosecuting him or other developers who build similar platforms in the future. Additionally, Lewellen is asking the court to cover his legal fees and any other relief it deems appropriate.

The result of this case could have lasting implications for the future of cryptocurrency in the U.S. If Lewellen wins, it could create a legal framework that allows developers to continue creating non-custodial tools without fear of government prosecution. On the other hand, if the DOJ wins, it could set a precedent that makes it harder for new innovations to flourish in the rapidly changing crypto industry.

Looking Ahead: The Changing Landscape of Crypto Regulations

The outcome of Lewellen’s legal battle could also be influenced by shifts in U.S. political leadership. As Attorney General Merrick Garland is expected to step down soon, the future direction of crypto regulation may change under his successor. This could affect how the DOJ handles cryptocurrency-related prosecutions and whether developers can continue to innovate freely.

Lewellen’s lawsuit is part of a broader movement within the crypto community to seek judicial clarity on regulations that are often seen as outdated or overly broad. In recent years, other companies and developers have filed lawsuits to challenge government actions that they believe hinder the growth of the cryptocurrency sector.

Conclusion: A Defining Legal Challenge for the Crypto Industry

Michael Lewellen’s legal battle is about much more than just his crowdfunding software, Pharos. It’s about ensuring that the U.S. remains a hub for cryptocurrency innovation, where developers can build tools that empower users without fearing unwarranted legal consequences. The outcome of this lawsuit could set the stage for how crypto developers operate in the future, making it a pivotal moment in the ongoing evolution of blockchain technology in the U.S.