The Securities Exchange Commission (SEC), has claimed that Ethereum transactions are carried out in the United States. This is because ETH nodes are “clustered less densely” than in any other country.
The SEC argument was found in a lawsuit filed against Ian Balina (crypto researcher and YouTuber), on Sept. 19, which alleges, among other things, that Balina offered Sparkster (SPRK tokens) to an unregistered buyer when he created an investing pool via Telegram in 2018.
According to the SEC, at the time U.S.-based investors participated Balina’s investment pool, the ETH contributions were validated and verified by a network on the Ethereum blockchain. These nodes are “clustered more densely than any other country”
According to the SEC, these transactions were conducted in the United States.
It is not clear at this point if such a claim will be accepted in court or if there is any precedent. According to Ethernodes, 42.56% of the 7807 Ethereum Nodes are currently located in the U.S.
Cointelegraph spoke with Dr. Aaron Lane, an Australian lawyer, Senior Research Fellow at RMIT Blockchain Innovation Hub, who explained that the distribution of Ethereum nodes was largely irrelevant to the case.
The most important thing here is the fact that we have a U.S.-based plaintiff and a U.S.-based defendant, as well as transactions flowing from the U.S. It doesn’t matter if the payment was made on Ethereum, Mastercard, or any other payment network.
Lane stated that although SEC’s claim is interesting, he also said that even though Balina’s lawyers didn’t contest the question of jurisdiction, it won’t have any effect on future cases.
“The defense may admit jurisdiction here. If they do, it won’t matter. If it’s not a litigated issue, the court will not say anything.” It is premature to worry about the legal precedent at this stage.
Related: Three cloud providers account for more than two-thirds Ethereum nodes: Data
Some have previously criticised the SEC for its regulatory approach to crypto. This has been called “regulation by enforcement”.
Gary Gensler, Chairman of the SEC, suggested recently that Ether-based staking could trigger U.S. securities law shortly after Ethereum went to proof-ofstake on September 15.
Balina responded to the lawsuit in a 19-part twitter thread, claiming that the allegations were “baseless” that he had “turned down settlement so [the SEC] can prove themselves.”
1 Official Statement regarding the SEC charges that Ian Balina was paid for his promotion of Sparkster. The SEC Enforcement Division’s proposed charges against Mr. Balina were unfounded and based on multiple misconceptions of law and fact.
— Ian Balina (@DiaryofaMadeMan) September 19, 2022
Balina didn’t comment on the SEC claim that the U.S. should have jurisdiction for Ethereum-based transactions due to the large distribution of nodes located in the U.S.
The charges against Balina are coming as Sparkster and its CEO Sajjad Daya have recently settled their case with the SEC. They agreed to repay $35 million to “harmed investor” after its ICO in 2018.