Judge Dismisses Lewellen Bid, Leaving Crypto Developers in Legal Gray Zone

A federal judge dismissed Michael Lewellen’s bid for advance legal clarity, keeping crypto developers stuck in the same ugly gray zone: build open-source software and hope regulators don’t decide you’re secretly running a money service.

• Lewellen’s case was dismissed in late March
• DOJ says it will target criminals, not code creators
• Developers still want binding legal clarity
• Tornado Cash remains the cautionary tale

When code runs into money transmission law

Michael Lewellen, a developer, asked a federal court to answer a simple but loaded question before he published a crypto crowdfunding tool: could writing and releasing that software count as money transmission?

For readers new to the term, money transmission generally refers to moving money for someone else — the kind of activity that can trigger licensing, compliance, and anti-money-laundering rules. The problem for crypto builders is that U.S. authorities have sometimes treated software infrastructure like a financial intermediary, even when the developer is just writing code and not handling customer funds directly.

The court wasn’t interested. It dismissed the lawsuit in late March, saying Lewellen had not shown a credible enforcement threat. No credible threat, no ruling. Clean on paper, messy everywhere else.

That may sound like a narrow procedural decision, but the practical effect is bigger: crypto developers still do not know where the line is. And when the line is fuzzy, the rational move is often to build less, publish less, and keep your head down. That is not exactly the kind of environment innovation is supposed to thrive in.

DOJ says it’s done with “regulation by prosecution”

The dismissal landed just as the Department of Justice was trying to project a friendlier posture toward crypto developers. At a Bitcoin conference in Las Vegas, Acting Attorney General Todd Blanche said the DOJ and FBI will focus on bad actors using crypto platforms for crime, not the people writing the software itself.

Blanche said developers who build software without knowledge of third-party criminal use should not be investigated or charged. He framed that as a break from the previous approach, which he labeled “regulation by prosecution” — basically, enforcing rules through criminal cases before the rules are clearly written.

“I do not want any platform to look at the Department of Justice or the FBI as somebody who’s going to just cause them a lot of problems,”

“if you are developing software, if you are a coder, if you are part of that process and you are not the…”

That second quote was offered in the context of Blanche’s broader argument that honest builders should not be treated like money launderers simply because criminals may also use their tools. The instinct is sensible. Most open-source software can be used for good or for abuse. A hammer can build a house or smash a window; nobody sane tries to indict the carpenter because a burglar found hardware.

Still, a speech is not a statute. And a softer tone from the DOJ is not the same thing as legal immunity.

Why Coin Center isn’t celebrating just yet

Peter Van Valkenburgh of Coin Center has been one of the clearest voices pushing back on the government’s ambiguity. He said the DOJ’s tone has improved, but he also pointed out the contradiction in the government’s position: if the law is so clear, why did it fight the dismissal in the first place?

“If the law is so clear why are devs sleeping with one eye open?”

That’s the entire debate in one sharp sentence.

Van Valkenburgh’s point is simple: developers do not just need a nice-sounding promise from officials at a conference. They need binding legal clarity. That means a court ruling, a statute, or formal regulatory guidance with teeth — not vague reassurances that can be reversed by the next administration or undercut by the next aggressive prosecutor hunting for headlines.

Without that, builders are still forced to guess. Is publishing open-source code enough to trigger money transmission rules? Can a privacy tool be treated like a financial intermediary? Does distributing software become a crime if some third party uses it for sanctions evasion or money laundering? Those are not academic questions. They decide whether people can build privacy-preserving tools without living under the permanent threat of federal enforcement.

Tornado Cash still casts a long shadow

No serious discussion of crypto developer liability can ignore Tornado Cash.

The Ethereum mixing service became the poster child for the fear that open-source code can be treated like a criminal enterprise. Tornado Cash was sanctioned by OFAC in August 2022, part of the U.S. government’s effort to crack down on sanctions evasion and money laundering. Those sanctions were lifted in November 2024, but the damage to developer confidence had already been done.

For the uninitiated, a mixer or mixing service is designed to obscure transaction trails, making it harder to trace where funds came from and where they went. Privacy advocates argue that tools like this can protect ordinary users from surveillance and financial profiling. Law enforcement argues that the same tools are useful for laundering stolen funds, hiding illicit transfers, and helping sanctioned actors move money. Both sides have a point. The tension is that regulators too often act as if the existence of abuse justifies treating the software itself like contraband.

That is exactly why Tornado Cash rattled so many builders. Once code authors can be dragged into a sanctions fight because other people used their software badly, open-source development starts to look less like engineering and more like a legal minefield with a GitHub repo attached.

The question is not whether the government should go after money laundering or sanctions evasion. Of course it should. The question is whether it should be able to blur the line between neutral software creation and active criminal conduct. If developers have to predict every possible misuse of their code, then open-source privacy tools, wallets, and decentralized protocols will be built with one eye on the law and the other on the exit.

What Blanche’s shift actually means

Blanche’s remarks suggest a real change in tone under the current administration. He also issued a memo in April 2025 ending what he called “regulation by prosecution”, signaling that the DOJ should not target developers for user misconduct they did not know about.

That matters. A lot.

Crypto developers have spent years watching enforcement agencies stretch old laws over new technology until the whole thing looked like a legal contortion act. If the government is now saying it will focus on the people actually committing crimes rather than the coders who built a neutral tool, that is a step in the right direction.

But there’s a hard truth here: government promises are cheap compared with legal certainty. Today’s friendly official can become tomorrow’s hostile witness. Today’s memo can be ignored, revised, or quietly narrowed later. And a post on stage at a Bitcoin conference does not protect anyone from a subpoena.

That is why the court dismissal of Lewellen’s case matters. It did not settle the issue. It just kept the uncertainty alive. The government says one thing, critics say the law still says another, and developers remain in the middle trying not to get flattened.

For Bitcoiners and privacy advocates, the larger lesson is familiar: if you want freedom to build decentralized systems, you need more than vibes and press releases. You need hard legal lines that stop the state from treating code authors like accomplices to crimes they never knew about.

What this means for crypto developers

For developers, the practical effect is straightforward: the legal risk has not disappeared. If you are building wallets, mixers, crowdfunding tools, DeFi infrastructure, or other open-source crypto software, the DOJ’s softer tone is welcome — but it is not the same as guaranteed protection.

That uncertainty can chill innovation fast. Builders may avoid privacy features. Teams may delay launches. Open-source projects may become more centralized and permissioned just to reduce legal exposure. In other words, the exact kind of overcautious behavior that kills the decentralized spirit before it has a chance to breathe.

And yes, regulators do have legitimate reasons to worry about criminal misuse. Bad actors absolutely exploit crypto platforms, mixers, and cross-chain services to move stolen funds, launder money, and dodge sanctions. Pretending otherwise would be naive. But hammering neutral software creators because criminals also like their tools is lazy enforcement dressed up as public safety.

That’s the real fight here: whether the U.S. wants to regulate crime, or whether it wants to keep sending mixed signals that make honest builders afraid to publish code in the first place.

Key questions and answers

Did the DOJ say crypto developers are safe now?
Mostly in tone, yes — but not in a legally binding way. Blanche said developers should not be investigated or charged simply for writing software they did not know would be used for crime.

Why was Michael Lewellen in court?
He wanted advance legal clarity on whether publishing a crypto crowdfunding tool could be treated as money transmission before he launched it.

What does “money transmission” mean?
It refers to moving money for others in a way that can trigger licensing and compliance rules. In crypto, the term becomes dangerous when regulators try to apply it to software developers instead of actual financial intermediaries.

Why are developers worried?
Because if publishing open-source crypto software can be treated like operating a money service, builders could face prosecution for how other people misuse their code.

What is “regulation by prosecution”?
It means enforcing policy through criminal or civil cases before rules are clearly written, instead of setting clear standards first.

Why does Tornado Cash matter so much?
Because it became the clearest example of how open-source crypto software can get caught in the crosshairs of sanctions and money laundering enforcement.

Did the Tornado Cash sanctions stay in place?
No. OFAC sanctioned Tornado Cash in August 2022, but those sanctions were lifted in November 2024.

What remains unresolved?
Whether writing and publishing neutral software can be treated as criminal conduct when third parties abuse it. Until that gets answered clearly, crypto developers are still operating under a cloud.

The DOJ may be talking softer, and that’s better than the old overreach circus. But unless the law changes or the courts draw a bright line, crypto developers will keep building in a fog — and fog is a lousy foundation for freedom.