A major legal battle is unfolding in the U.S. as leading crypto advocacy groups challenge the Department of Justice’s (DOJ) attempt to apply money transmission laws to open-source software developers. The case, Lewellen v. Bondi, could have profound implications for the future of decentralized finance (DeFi) and software development in the blockchain space.
DOJ Seeks to Expand Money Transmission Laws to DeFi Developers
At the center of the lawsuit is Michael Lewellen, a developer who created a non-custodial DeFi protocol and now faces legal uncertainty over releasing the open-source software to the public.
The DOJ is applying Section 1960 of Title 18 of the U.S. Code, originally intended for unlicensed money transmitters, to prosecute developers who do not hold or control user funds, but simply publish tools that others may use to send cryptocurrencies peer-to-peer.
Crypto Groups File Amicus Brief to Defend Developer Rights
A coalition of blockchain-focused organizations — including Paradigm, DeFi Education Fund, Blockchain Association, and the Crypto Council for Innovation — filed an amicus brief in support of Lewellen, arguing that the DOJ is overstepping its legal authority.
“The government is prosecuting developers for writing open-source code. That’s like charging a frying pan manufacturer for someone’s cooking,” the brief explains.
They argue that publishing code without controlling funds does not meet the legal definition of money transmission. According to their filing, a person cannot ‘transmit’ funds without first taking custody of them, and this distinction is central to preserving the freedom to publish decentralized tools.
Developers Face Chilling Legal Environment in the U.S.
This case is part of a broader crackdown, including ongoing DOJ cases against Tornado Cash developers and others involved in privacy-focused crypto software. The threat of prosecution is causing many developers to halt innovation or relocate operations overseas, the brief warns.
Crypto advocates fear that unless U.S. courts clearly separate software development from financial intermediation, the country will lose its competitive edge in blockchain innovation.
Legal Clarity Needed to Preserve Open-Source Development
The amicus brief urges the court to allow Lewellen’s case to proceed, rejecting the DOJ’s motion to dismiss. The groups argue that only a declaratory judgment can clarify that building and publishing open-source software is not a crime.
This case follows other significant legal efforts, including the recent dismissal of Coin Center’s lawsuit against the U.S. Treasury over Tornado Cash sanctions. Despite that loss, this new case represents a pivotal opportunity for courts to defend developer rights, technological neutrality, and constitutional freedoms.
In short
The crypto community is watching Lewellen v. Bondi closely. If the DOJ succeeds in applying financial crime laws to code developers, the implications could reshape the landscape of blockchain development in the U.S. This lawsuit is now a key battleground for the future of DeFi, open-source freedoms, and crypto innovation.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.