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SEC lawsuit claims jurisdiction as ETH nodes cluster in US




The United States Securities Exchange Commission (SEC) has made an unprecedented assertion that Ethereum transactions take place in the United States, as Ethereum nodes are clustered more densely in the United States than in any other country.

The SEC’s argument is found in a Sept. 19 lawsuit against crypto researcher and YouTuber Ian Balina, which alleged, among numerous other complaints, that Balina conducted an unregistered offering of Sparkster tokens (SPRK) when he had formed an investment pool on Telegram in 2018.

The SEC claims that as US-based investors participated in the Balinas investment pool, Ether (ETH) contributions were validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the states. States than in any other country. .

The SEC argued that, as a result, these transactions took place in the United States.

At this point, it is unclear whether such a claim will hold up in court or if there is any legal precedent at play. However, currently 42.56% of the 7,807 Ethereum nodes are currently located in the United States, according to Ethernodes .

Speaking to Cointelegraph, Aaron Lane, an Australian lawyer and senior researcher at the RMIT Blockchain Innovation Hub, said the distribution of Ethereum nodes is largely irrelevant to the current case, explaining:

The fact that we have a plaintiff based in the United States, a defendant based in the United States and transactions originating in the United States is what is most relevant here. It doesn’t matter if the payment was made on Ethereum, Mastercard or any other payment network for that matter.

Lane said that while the SEC claim is interesting, he added that even if Balinas’ attorneys do not dispute the jurisdictional issue, it will not impact future cases at this time:

The defense can concede jurisdiction here, and if they do, it won’t be an issue, and if it’s not a disputed issue, the court won’t say anything about it. Any concerns about legal precedent at this stage are premature.

Related: 3 Cloud Providers Representing Over Two-Thirds of Ethereum Nodes: Data

The SEC has previously been criticized for its regulatory approach to crypto, which has been characterized by some as regulation by enforcement.

SEC Chairman Gary Gensler recently hinted that Ether-based staking could also trigger US securities laws soon after Ethereum transitions to proof-of-stake on September 15.

Responding to the lawsuit, Balina said in a 19-part Twitter thread that the charges were baseless and that he refused the settlement so they [SEC] must prove themselves.

1/ Official Statement on Baseless SEC Charges Regarding Ian Balina’s Compensation for Promoting Sparkster:

The charges proposed by the SEC’s Enforcement Division against Mr. Balina are a baseless effort based on multiple misconceptions of fact and law, listed below.

— Ian Balina (@MadeManDiary) September 19

Balina did not comment on the SEC’s assertion that the United States should have jurisdiction over Ethereum-based transactions due to the high distribution of nodes located in the United States.

Balinas’ accusations come as Sparkster and its CEO, Sajjad Daya, recently settled its case with the SEC on September 19, agreeing to pay back $35 million to aggrieved investors after its initial coin offering (ICO) in 2018.




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