The Securities Exchange Commission (SEC) has made an interesting claim saying as Ethereum nodes are “clustered more densely” in the United States than anywhere else, Ethereum transactions take place in the United States.
SEC’s argument appears in a lawsuit filed on Sept. 19 against blockchain researcher and YouTuber Ian Balina, which alleged that Balina formed an investing pool on Telegram in 2018 that offered Sparkster (SPRK) tokens unregistered.
SEC finds that, at the time of US participation in Balina’s investing pool, ETH contributions were validated by a network of Ethereum nodes located in the US more densely than in any other country which results in “those transactions took place in the United States.”
The Distribution of Ethereum Nodes is Irrelevant to the Case
While it is unclear whether such a claim will hold up in court or whether there is any precedent at stake, Ethernodes reports that 42.56 percent of the 7807 Ethereum nodes are located in the U.S.
An Australian lawyer and Senior Research Fellow at the RMIT Blockchain Innovation Hub, Dr. Aaron Lane, said to Cointelegraph that the distribution of Ethereum nodes is irrelevant to the case.
“The fact that we’ve got a U.S. based plaintiff, a U.S. based defendant and transactions flowing from the U.S. is what is most relevant here. It doesn’t matter whether the payment was done on Ethereum, Mastercard or any payment network for that matter.”
Despite the SEC’s interesting claim, Lane noted that even if Balina’s lawyers do not contest the issue of jurisdiction, it won’t affect future cases.
“The defense may concede jurisdiction here, and if they do it won’t be an issue, and if it’s not a contested issue then the court won’t say anything about it. Any concern about legal precedent at this stage is premature.”
Responding to The Charge
In the past, the SEC has been criticized for its regulatory approach to crypto, which has been referred to as “regulation by enforcement.”
Balina responded to the lawsuit on Twitter, saying the charges were “baseless” and that he had rejected a settlement so the SEC need to prove themselves.
1/ Official Statement on the baseless SEC charges regarding Ian Balina being compensated for promoting Sparkster:
The SEC Enforcement Division's proposed charges against Mr. Balina are an unfounded effort based upon multiple misconceptions of fact and law, enumerated below.
— Ian Balina (@DiaryofaMadeMan) September 19, 2022
“1/ Official Statement on the baseless SEC charges regarding Ian Balina being compensated for promoting Sparkster:
The SEC Enforcement Division’s proposed charges against Mr. Balina are an unfounded effort based upon multiple misconceptions of fact and law, enumerated below,” tweeted Balina.