Blockchain developer Michael Lewellen has filed a lawsuit against the US Department of Justice (DOJ), accusing the President Joe Biden administration of stifling innovation in the crypto sector through overly broad interpretations of federal money-transmission laws.
Lewellen’s lawsuit centers on his work with Pharos, a non-custodial protocol that facilitates trustless and transparent crowdfunding campaigns. Pharos enables users to pool crypto for charitable causes or other projects without the involvement of intermediaries.
Lewellen described his decision to sue as a stand against regulatory overreach in a statement. He added:
“Today, I’m taking a stand against the Biden administration’s unjust crackdown on crypto development […] This isn’t just about Pharos; it’s about the future of cryptocurrency innovation in America.”
Legal challenge
Lewellen argued that his non-custodial protocol, which he likens to a tool rather than a financial service, should not be subject to federal money-transmitting laws.
Unlike traditional money transmitters such as Western Union or Venmo, Pharos does not control, direct, or possess the funds being transferred. Instead, the software enables users to execute transactions independently, preserving privacy and reducing reliance on intermediaries.
Lewellen claimed that the DOJ’s enforcement actions against developers of similar non-custodial protocols, such as Tornado Cash, demonstrate a troubling expansion of federal authority.
He added that these prosecutions deviate from longstanding guidance issued by the Financial Crimes Enforcement Network (FinCEN), which had previously indicated that non-custodial tools did not qualify as money transmitters.
Lewellen also stated:
“The DOJ’s broad interpretation of money transmission laws threatens the ability to build freely […] For too long, the Biden administration has used a lack of clarity to scare builders away from new technology or force them to leave the USA.”
Broader implications
The lawsuit highlights the growing friction between US regulators and the crypto industry. Developers like Lewellen argue that regulatory ambiguity drives innovation offshore, while policymakers maintain that tighter oversight is necessary to curb illicit activity and protect consumers.
Amanda Tuminelli, chief legal officer at the DeFi Education Fund, praised Lewellen for advocating for software developers and called the lawsuit “hero stuff.”
Meanwhile, Peter Van Valkenburgh, CEO of the non-profit Coin Center, said that the organization supports Lewellen in defending his right to publish software.
