Lewellen v. Bondi

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
MICHAEL LEWELLEN,
Plaintiff,
v.
PAMELA BONDI,
Defendant.
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Civil Action No. 4:25-cv-00030-O
OPINION & ORDER
Before the Court are Defendant’s Motion to Dismiss (ECF No. 26); Plaintiff’s Response
(ECF No. 31); Amicus Brief filed in Support of Plaintiff’s Response filed by Bitcoin Policy
Institute, Blockchain Association, Crypto Council For Innovation, Defi Education Fund, Paradigm
Operations LP, Solana Policy Institute, The Digital Chamber, Uniswap Foundation (ECF No. 34);
and Defendant’s Reply (ECF No. 37). Having reviewed the briefing and applicable law, the Court
GRANTS the Motion to Dismiss.
I. 	BACKGROUND1
Plaintiff 	Michael 	Lewellen 	(“Lewellen”) 	plans 	to 	start 	a 	business 	based 	on 	a
cryptocurrency 	software 	product 	he 	developed 	called 	Pharos. 	The 	software 	“facilitates
cryptocurrency donations to charitable crowdfunding campaigns.”2 Lewellen alleges his software
is “non-custodial,” meaning that he would have “no custody or control over any cryptocurrency
that others put through it.”3 “He intends to pay for and maintain a website from which users can
1 Unless otherwise indicated, all facts are taken from Plaintiffs’ Complaint (ECF No. 1).
2 Resp. 1, ECF No. 31.
3 Id.
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access an optional interface to use Pharos.”4 Lewellen “will not register his business as a federal
money transmitter” because “it will be impossible to comply with the reporting requirements that
registration would demand.”5 He says this is because the privacy technology he intends to
incorporate into Pharos would prevent him from getting “access to the information about users that
compliance would require.”6 He also disclaims any intent to transport or criminal funds using his
software.
Lewellen has refrained from launching his business out of fear of prosecution under 18
U.S.C. § 1960. 	This statute criminalizes the failure “to comply with the money transmitting
business registration requirements under 5330 of title 31, United States Code, or regulations
prescribed under such section” for “whoever knowingly conducts, controls, manages, supervises,
directs, or owns all or part of an unlicensed money transmitting business[.]” 18 U.S.C. § 1960.
He is concerned that he will face prosecution for his business that uses his non-custodial code
because there are “several ongoing cases with operating unlicensed ‘money transmitting’
businesses under 18 U.S.C. §[]1960(b)(1)(B)”7 involving similar non-custodial software. He filed
this action, seeking a declaratory judgment that his actions are legal and an “injunction preventing
the enforcement of the federal money transmitting laws against Lewellen’s planned cryptocurrency
business.”8 The Government moved to dismiss, and its motion is ripe for review.
4 Id. at ¶ 54.
5 Compl. ¶ 56, ECF No. 1.
6 Id.
7 Resp. 1, ECF No. 31.
8 Compl. ¶ 38, ECF No. 1.
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II. 	LEGAL STANDARDS
A. Federal Rule of Civil Procedure 12(b)(1)
Federal courts are courts of limited jurisdiction and must have “statutory or constitutional
power to adjudicate the case.” Home Builders Ass’n of Miss. v. City of Madison, 143 F.3d 1006,
1010 (5th Cir. 1998). Under the Constitution’s Article III cases and controversies requirement, a
plaintiff must establish standing to sue. 	Standing requires: (1) an injury in fact, (2) a sufficient
“causal connection between the injury and the conduct complained of” and (3) a likelihood that
the injury will be redressed by a favorable decision. Morgan v. Huntington Ingalls, Inc., 879 F.3d
602, 606 (5th Cir. 2018) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992); U.S.
C ONST. art. III, § 2. 	The injury must be concrete and particularized, not merely “conjectural or
hypothetical.” Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009). 	A “‘threatened injury
must be certainly impending to constitute [an] injury in fact,’ and . . . ‘[a]llegations of possible
future injury’ are not sufficient.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409 (2013) (quoting
Whitmore v. Arkansas, 495 U.S. 149, 158 (1990)). 	In order “to meet the Article III standing
requirement when a plaintiff is seeking injunctive or declaratory relief, a plaintiff must allege facts
from which it appears there is a substantial likelihood that he will suffer injury in the future.”
Bauer v. Texas, 341 F.3d 352, 358 (5th Cir. 2003). 	“The burden of proof for a Rule 12(b)(1)
motion to dismiss is on the party asserting jurisdiction. Accordingly, the plaintiff constantly bears
the burden of proof that jurisdiction does in fact exist.” Ramming v. United States, 281 F.3d 158,
161 (5th Cir. 2001) (citation omitted).
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III. 	ANALYSIS
A. Defendants’ Rule 12(b)(1) Motion to Dismiss
There is no “unqualified right to pre-enforcement review of constitutional claims in federal
court.” Whole Woman’s Health v. Jackson, 595 U.S. 30, 49 (2021). 	For pre-enforcement
challenges in the Fifth Circuit, a “plaintiff has suffered an injury in fact if he (1) has an intention
to engage in a course of conduct arguably affected with a constitutional interest,” (2) his intended
future conduct is proscribed by statute or policy, and (3) “the threat of future enforcement of the
challenged [policy or rule] is substantial.” Speech First, Inc. v. Fenves, 979 F.3d 319, 330 (5th
Cir. 2020), as revised Oct. 30, 2020 (quoting Susan B. Anthony List v. Driehaus, 573 U.S. 149,
161–64 (2014)).
Lewellen fails to show there is substantial threat of prosecution under 18 U.S.C. § 1960.
Speech First, Inc. v. Fenves, 979 F.3d 319, 330 (5th Cir. 2020). “[T]here must be some evidence
that a rule would be applied to the plaintiff” when he brings an as-applied challenge, as Lewellen
does here. Umphress v. Hall, 133 F.4th 455, 464 (5th Cir. 2025) (cleaned up). This requirement
may be satisfied when the “core conduct” of a prior enforcement action is “substantially similar”
to a plaintiff’s intended actions or where the government has issued warnings against the intended
course of conduct. 	Id. at 466; See, e.g., Braidwood Mgmt., Inc. v. Equal Emp. Opportunity
Comm’n, 70 F.4th 914, 926 (5th Cir. 2023) (finding a credible threat when plaintiffs “admit they
are breaking EEOC guidance, which the EEOC does not seriously contest”).
Lewellen argues he has a credible fear of prosecution because of ongoing Department of
Justice (“DOJ”) cases against defendants “operating unlicensed ‘money transmitting’ businesses
under 18 U.S.C. §[]1960(b)(1)(b)”9 with similar non-custodial cryptocurrency technology. That
9 Resp. 1, ECF No. 31.
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contention is unpersuasive. The “core conduct” of those cases is money laundering.10 Umphress,
133 F.4th at 464. By contrast, the core conduct here would be running a business. And Lewellen
disclaims any knowing transmission of criminal funds, which is central to the prosecutions he
invokes.11 Consistent with this distinction, the DOJ has issued a memorandum entitled “Ending
Regulation By Prosecution,” formally declaring DOJ will not pursue enforcement actions against
“virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their
end users or unwitting violations of regulations”12—the exact scenario over which Lewellen
brought this suit.
Accordingly, the ongoing cases are not “substantially similar” to Lewellen’s intended
conduct. Id. at 466. While both involve non-custodial cryptocurrency technology, similarity of
the tools does not establish similarity of conduct. The critical inquiry is the underlying nature of
the conduct, not the mechanism by which the conduct is carried out. 	Lewellen admits that his
cryptocurrency software code is merely a tool.13 The fact that “DOJ has taken the position that 18
U.S.C. § 1960 does not require the business to have control of transferred cryptocurrency as a
prerequisite to registering as a money transmitter”14 while targeting money laundering does not
establish a credible threat of prosecution against a business simply because it uses a non-custodial
10 See Sealed Indictment, United States v. Storm et al., 23-cr-430, ECF No. 1, ¶¶ 56–68 (S.D.N.Y. Aug. 21,
2023); Sealed Superseding Indictment, United States v. Rodriguez et al., 24-cr-82, ECF No. 4, at ¶ 28
(S.D.N.Y. Feb. 14, 2024).
11 Compl. ¶ 55, ECF No. 1.
12 Memorandum from Deputy Attorney General on Ending Regulation by Prosecution to All DOJ
employees (April 7, 2025) (available at www.justice.gov/dag/media/1395781/dl?inline). 	While this
memorandum was published after Plaintiff brought this suit, it aligns with the reason why Plaintiff did
not have a credible fear of prosecution at the time of filing.
13 Compl. ¶ 60, ECF No. 1 (“[S]omeone does not ‘transfer,’ ‘transmit,’ or ‘accept’ some object when he
creates the tool that other people use to move it, like Lewellen does with Pharos.”); id. at ¶ 2 (Lewellen’s
cryptocurrency software “will simply be a tool that others can use to move money, like an envelope used
to move checks in the mail.”) (emphasis in original); id. at ¶ 3 (“The laws against unlicensed money
transmission seek to regulate intermediaries in the sensitive business of moving customers’ money, not
technologists who create tools that allow users to move money themselves.”).
14 Mot. Dismiss 2, ECF No. 26.
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cryptocurrency software. Without more, Lewellen has only “a general fear of prosecution [which]
‘cannot substitute for the presence of an imminent, non-speculative irreparable injury.’” Id. (citing
Google, Inc. v. Hood, 822 F.3d 212, 228 (5th Cir. 2016).
IV. 	CONCLUSION
Because Lewellen does not show “a credible threat of prosecution” under 18 U.S.C.
§ 1960, he does not have standing to bring his pre-enforcement challenge. Driehaus, 573 U.S. at
159. Accordingly, the Court DISMISSES his claims without prejudice.
SO ORDERED this March 25, 2026.
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