SEC Lawsuit Asserts That It Has Jurisdiction Since ETH Nodes Are “Clustered” In The US

Because ETH nodes are “clustered more thickly” in the United States than in any other nation, the Securities and Exchange Commission (SEC Lawsuit) has made the unprecedented claim that Ethereum transactions take place in the country.

SEC Lawsuit reasoning may be found in a lawsuit filed on September 19 against cryptocurrency researcher and YouTuber Ian Balina. Among other things, the lawsuit claimed that Balina ran an unregistered offering of Sparkster (SPRK) tokens in 2018 when he established an investment group on Telegram.

SEC Lawsuit asserts that at the time U.S.-based investors joined Balina’s investment pool, a network of Ethereum blockchain nodes, “which are clustered more densely in the United States than in any other country,” validated the ETH contributions.

SEC Lawsuit argued that as a result “those transactions took place in the United States”

At this stage, it is unclear whether such a claim will hold up in court, or whether there is any legal precedent at stake. However, currently 42.56% of the 7807 Ethereum nodes currently situated in the U.S. according to Ethernodes.

The SEC has already come under fire for its regulatory approach to cryptocurrencies, which some have dubbed “regulation by enforcement.”

Gary Gensler, the chairman of the SEC, recently made a suggestion that shortly after Ethereum switched to proof-of-stake on September 15, Ether-based staking would also be subject to U.S. securities regulations.

In a 19-part Twitter thread in response to the complaint, Balina claimed that the allegations were “baseless” and that he had “turned down settlement so they [SEC] have to prove themselves.”

Regarding the SEC’s assertion that the U.S. should have jurisdiction over transactions based on Ethereum because of the significant number of nodes there, Balina chose not to respond.

Balina’s accusations come after Sparkster and its CEO, Sajjad Daya, recently settled their complaint with the SEC on September 19, agreeing to reimburse $35 million to “harmed investors” after their ICO in 2018.

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