The SEC lawsuit says they have the right to sue because ETH nodes are “clustered” in the US
The Securities Exchange Commission (SEC) has claimed in a way that is unprecedented that Ethereum transactions are conducted within the United States as ETH nodes are “clustered more densely” in the United States than any other country.
It is believed that the SEC claim is contained in an September. 19 lawsuit filed against YouTuber and researcher Ian Balina, which alleged among other claims that Balina ran an unregistered offer of Sparkster (SPRK) tokens in the course of forming an investment pool on Telegram in the year 2018.
Related: Post-Merge Ethereum Hits 2-Month Low, Bitcoin Back Around $18K
The SEC states that, at the time U.S.-based investors were part of Balina’s investment pool, the ETH contributions were vetted by an array of nodes that were based on the Ethereum blockchain, “which are clustered more densely in the United States than in any other country.”
The SEC asserted that, in the end, “those transactions took place in the United States.”
At the moment, it isn’t clear whether this claim will stand up before a judge, and if there is any precedent legal to be considered. However, as of now, 42.56 percent from the total of 7807 Ethereum nodes are located within the U.S. according to Ethernodes.
In an interview with Asian trade, Dr. Aaron Lane, an Australian lawyer and Senior Research Fellow at the RMIT Blockchain Innovation Hub said the distribution of Ethereum nodes is not relevant to the situation that is at hand. He explained:
“The the fact that we’ve got an U.S. Plaintiff based in the U.S as well as the U.S. located defendant, and transactions that originate through into the U.S. is the thing that is the most important here. It doesn’t matter if the payment was processed via Ethereum, Mastercard or any payment system in any case.”
Lane stated that, while the SEC’s assertion was an intriguing one, he also said that even if Balina’s lawyers do not contest the jurisdiction issue the case won’t affect the future case.
“The defense could concede the jurisdiction in this case or not, and if they decide to do so, it will not be a matter of contention or if it’s an issue that is contested, then the court will not say anything about the matter. Any concern regarding precedents in the law at this point is unfounded.”
Related to this: Three cloud providers account for more than two-thirds Ethereum nodes Data
The SEC has been attacked for its regulatory approach to cryptocurrency and was described in some circles to be “regulation by enforcement.”
SEC Chair Gary Gensler recently hinted that Ether-based staking may cause U.S. securities laws soon after Ethereum changed to proof-of-stake on September. 15.
In response to the lawsuit Balina declared in a 19-part thread on Twitter that the allegations of the lawsuit were “baseless” and that he “turned down settlement so they [SEC] have to prove themselves.”
Related: Gensler: Ether staking could break securities laws.
Balina did not respond to the assertion of the SEC it believes there is a need for the U.S. should be afforded the jurisdiction to conduct transactions using Ethereum due to the widespread distribution of nodes within the U.S.
The charges against Balina are being brought as Sparkster and CEO Sajjad Daya , recently resolved their case before the SEC on September. 19, after having agreed to repay the sum of $35 million “harmed investors” following its ICO in 2018.
