Texas Court Dismisses Crypto Developer’s Lawsuit Seeking Clarity on Money Transmitter Laws
A Texas court has dismissed a lawsuit filed by cryptocurrency developer Michael Lewellen, seeking a declaratory judgment that his software, Pharos – designed to facilitate donations to charitable crowdfunding campaigns – does not violate money transmission laws. The dismissal, decided by U.S. District Judge Reed O’Connor on Wednesday, hinged on Lewellen’s failure to demonstrate a credible threat of imminent prosecution, Cointelegraph reported.
Background: Pharos and the Legal Challenge
Lewellen, a fellow at crypto advocacy group Coin Center, argued that developers of software similar to Pharos, such as those behind Tornado Cash and Samourai Wallet, have faced legal challenges under existing money transmission laws. He sought legal certainty for his project, which allows for crypto donations to charities. Cointelegraph notes the suit was filed in January.
Court Cites Department of Justice Memo
The court’s decision referenced a Department of Justice (DOJ) memo stating it would no longer target virtual currency exchanges, mixing and tumbling services, or offline wallets for the actions of their end-users or unwitting regulatory violations. However, Lewellen expressed his disappointment, stating that a “non-binding DoJ memo is no substitute for real legal certainty,” according to CryptoNews.
Recent Cases and Developer Concerns
The case highlights a growing concern among crypto software developers seeking legal protections against criminal liability for the software they create. Recent prosecutions, including the conviction of Tornado Cash co-founder Roman Storm on charges of conspiracy to operate an unlicensed money-transmitting business, and the guilty verdicts for the co-founders of Samourai Wallet on the same charge, have fueled these concerns. CryptoNews details these prior cases.
Dismissal “Without Prejudice”
The court dismissed the case “without prejudice,” meaning Lewellen retains the option to refile the lawsuit after making amendments. Lewellen has indicated that his legal team is exploring potential next steps. TechFlowPost reported on this possibility.
Implications for the Crypto Industry
This dismissal underscores the ongoing legal ambiguity surrounding cryptocurrency software development in the United States. While the DOJ memo offers some reassurance, developers continue to seek definitive legal clarity to protect themselves from potential prosecution. The outcome of this case, and similar ones, will likely shape the future of crypto innovation and regulation.
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