Texas Court Dismisses Pharos Developer’s Lawsuit

Michael Lewellen sued in the U.S. District Court for the Northern District of Texas on January 16, 2025, arguing that Pharos is merely noncustodial software that helps charitable crowdfunding campaigns accept cryptocurrency donations and that its developers neither hold nor control user assets. He sought a declaration that he would not be prosecuted under the unlicensed money-transmitting-business provisions of Title 18, Section 1960 of the U.S. Code, aiming to clarify the boundary between the responsibilities of software authors and financial intermediaries.

Chief Judge Reed O’Connor granted the U.S. Justice Department’s motion to dismiss on March 25, 2026, finding that Lewellen had failed to demonstrate a credible and imminent threat of prosecution and therefore lacked standing. The case was dismissed without prejudice. The court also cited an April 7, 2025, Justice Department memorandum. It did not rule on whether Pharos was unlawful, and the case involved no fines or damages.