A Texas court has dismissed a lawsuit filed by crypto developer Michael Lewellen, who sought legal clarity that his software, Pharos, would not be treated as a money transmitter under US law. The ruling, issued by Chief US District Judge Reed O’Connor, concluded that Lewellen failed to show a credible and immediate threat of prosecution.
Lewellen, who is also affiliated with crypto advocacy group Coin Center, expressed disappointment with the decision. He noted that relying on informal government guidance does not provide the legal certainty developers need when building financial software.
Why the Case Matters for Crypto Developers
The case highlights growing concerns among crypto developers about potential criminal liability tied to the tools they create. Lewellen argued that previous prosecutions of developers behind privacy-focused platforms had created a real risk for others in the industry.
He pointed to high-profile cases involving Tornado Cash and Samourai Wallet, where developers faced charges related to operating unlicensed money-transmitting businesses. However, Judge O’Connor distinguished those cases, stating they primarily involved money laundering activities, unlike Lewellen’s software, which is designed to facilitate charitable donations.
Despite the dismissal, the case is not entirely over. The court dismissed it without prejudice, meaning Lewellen has the option to refile with adjustments. His legal team is currently reviewing possible next steps.
Meanwhile, industry advocates continue to push for clearer regulations. Calls are growing for lawmakers to pass the Blockchain Regulatory Certainty Act of 2026, a proposed bill that aims to protect developers of non-custodial software who do not control user funds from being classified as money transmitters.
