The SEC lawsuit claims jurisdiction because the ETH contract is “pooled” in the US

The US Securities and Exchange Commission (SEC) has made an unprecedented claim that Ethereum transactions take place in the US because Ethereum nodes are “clustered more densely” in the US than in any other country.

The SEC argument was found in a September 19 lawsuit against crypto researcher and YouTuber Ian Balina, which, among several other complaints, alleges that Balina made an unregistered offer for Sparkster tokens (SPRK) when he formed an investment pool on Telegram in year 2018.

The Securities and Exchange Commission (SEC) claims that while US-based investors participated in the Balina investment pool, ETH (ETH) contributions were validated through a network of nodes on the Ethereum blockchain, which are more densely clustered in the US from any other country. country.”

As a result, the Securities and Exchange Commission argued, “these transactions occurred in the United States.”

At this point, it is not clear whether such a claim will hold up in court or whether there is any legal precedent at stake. However, currently, 42.56% of the 7,807 Ethereum nodes are currently in the US, according to Ethernodes.

Speaking to Cointelegraph, Aaron Lane, Australian attorney and senior research fellow at the RMIT Blockchain Innovation Hub, said the distribution of Ethereum nodes is largely unrelated to the issue at hand, explaining:

“The fact that we have a US resident plaintiff, US defendant, and transactions streamed from the US is the most relevant here. It doesn’t matter if the payment is made on Ethereum or Mastercard or any payment network for that matter.”

Lin said that while the SEC’s claim was interesting, he added that even if Balina’s lawyers did not challenge the question of jurisdiction, it would have no bearing on future cases for now:

“The defense might waive jurisdiction here, and if they did it wouldn’t be a problem, and if it wasn’t a contested case, the court wouldn’t say anything about it. Any concern about legal precedent at this point is premature.”

Related: 3 Cloud Providers Represent Over Two-Thirds Of Ethereum Contracts: Data

The Securities and Exchange Commission has previously been criticized for its regulatory approach to cryptocurrencies, which some have described as “regulation by application.”

SEC head Gary Gensler recently hinted that betting on Ether could also trigger US securities laws soon after Ethereum moved to proof of stake on September 15.

In response to the lawsuit, Ballina said in 19 segments on Twitter that the charges were “baseless” and that he “refused to settle even [SEC] They must prove themselves.”

Ballina has not commented on the SEC’s claim that the United States should be granted jurisdiction over Ethereum-based transactions due to the massive distribution of nodes located in the United States.

Ballina’s fee comes as Sparkster and its CEO, Sajjad Daya, recently settled its case with the Securities and Exchange Commission on September 19, agreeing to pay $35 million to “affected investors” after its initial coin offering (ICO) in 2018.