US Court Dismisses Lawsuit Over Non-Custodial Software Regulation

A federal court in Texas has dealt a setback to efforts aimed at shielding non-custodial tools from regulatory scrutiny.

Crypto developer Michael Lewellen had filed a lawsuit seeking a declaratory judgment that his blockchain-based software, Pharos, would not be subject to prosecution under US money transmission laws.

The court documents revealed that Lewellen was concerned about facing prosecution due to the use of non-custodial code in his business, which he believed could be considered an unlicensed 'money transmitting' business under 18 U.S.C. § 1960.

However, the court rejected the claim, ruling that Lewellen failed to demonstrate a credible or imminent threat of enforcement against him.