Texas Judge Dismisses Crypto Case-Developer Loses; Turned DoJ Memo into Myth!

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Texas Judge throws out crypto software liability case

A federal court in Texas has thrown out a lawsuit brought by cryptocurrency software developer Michael Lewellen. He had asked the court to rule that his software didn’t break US laws regarding money transfers.

Summary

  • Texas court dismissed Lewellen lawsuit citing no credible threat of prosecution tied to his software
  • Judge referenced DOJ memo stating developers not targeted for user actions or unintended regulatory violations
  • Coin Center urges Congress to pass bill clarifying non custodial developers are exempt from money laws

The lawsuit concerned Pharos, a program that helps people donate to charity crowdfunding efforts. On Wednesday, the main federal judge overseeing the case, Reed O’Connor, dismissed it. The judge explained that the plaintiff, Lewellen, didn’t demonstrate a real and immediate risk of being prosecuted for creating the software.

Lewellen reacted to the ruling on X. He wrote, 

”Disappointed to see the court dismiss my suit today.” 

The court closed the case for now, but Lewellen can refile it if they make some revisions.

Judge points to DOJ memo and case differences

In its decision, the court referenced a memo from the Department of Justice that significantly impacts my research. This memo essentially states that federal prosecutors will no longer go after virtual currency exchanges, services that mix or ‘tumble’ transactions, or even personal offline wallets, for things their users do or accidental regulatory issues. It’s a key development, as it clarifies the scope of potential legal repercussions within the cryptocurrency space and allows me to focus my work with more clarity.

Lewellen rejected that point as enough legal protection. He said, 

”A non-binding DoJ memo is no substitute for real legal certainty.” 

Judge O’Connor also said the cases Lewellen relied on were not close matches to his own situation.

Lewellen also pointed out that the creators of software like Tornado Cash and Samourai Wallet could be prosecuted under comparable laws. He highlighted these examples to demonstrate that developers like himself are genuinely at risk of legal action.

Judge O’Connor said those prosecutions centered on money laundering. He wrote, 

”By contrast, the core conduct here would be running a business.” 

He stated that Lewellen claimed he didn’t knowingly send money involved in criminal activity, a point the judge considered key to the previous investigations.

Coin Center and supporters push for legal clarity

Lewellen stated his lawyers are considering what to do next. Coin Center, the group that supported the lawsuit, explained that the court’s decision based on the DOJ memo doesn’t settle the larger question for software developers.

Coin Center executive director Peter Van Valkenburgh said, 

”The Blanche memo is not enough to secure their rights.” 

He and Lewellen are urging Congress to approve the Blockchain Regulatory Certainty Act of 2026, which Senator Cynthia Lummis proposed in January. This legislation would clarify that developers of software where users maintain control of their own funds wouldn’t be regulated as money transmitters.

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2026-03-26 11:00