US court rejects crypto dev’s lawsuit seeking safe harbor for non-custodial software

The U.S. District Court for the Northern District of Texas dismissed a lawsuit filed by crypto developer Michael Lewellen, who sought a declaratory judgment that his non-custodial software, Pharos, was legal and an injunction against money transmitter laws. Lewellen argued that registering as a money transmitter was impossible due to the software's privacy features preventing access to required user information. Chief Judge Reed O'Connor dismissed the case because Lewellen failed to show a "substantial threat of prosecution," noting that existing prosecutions involved money laundering, not just operating a business tool, and referencing a recent DOJ memo discouraging enforcement against crypto services for end-user actions. The dismissal was without prejudice, allowing Lewellen to refile if enforcement threats become more imminent. Lewellen expressed disappointment, stating a non-binding DOJ memo offers insufficient legal certainty and urged Congress to pass the Blockchain Regulatory Certainty Act (BRCA).

(Source：The Block)