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The Securities Exchange Commission (SEC) has made an unprecedented claim that Ethereum transactions take place in the United States as ETH nodes are \u201cclustered more densely\u201d in the United States than any other country.\u00a0<\/p>\n
The SEC argument<\/a> is found within a Sept. 19 lawsuit against crypto researcher and YouTuber Ian Balina, which alleged, among many other complaints, that Balina conducted an unregistered offering of Sparkster (SPRK) tokens when he formed an investing pool on Telegram in 2018. <\/p>\n The SEC claims that at the time that U.S.-based investors participated in Balina\u2019s investing pool, the ETH contributions were validated by a network of nodes on the Ethereum blockchain, \u201cwhich are clustered more densely in the United States than in any other country.\u201d<\/p>\n The SEC argued that as a result, \u201cthose transactions took place in the United States.\u201d<\/p>\n 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<\/a> to Ethernodes.<\/p>\n Speaking to Cointelegraph, Dr. Aaron Lane, an Australian lawyer and Senior Research Fellow at the RMIT Blockchain Innovation Hub said the distribution of Ethereum nodes is largely irrelevant to the case at hand, explaining: <\/p>\n \u201cThe fact that we\u2019ve 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\u2019t matter whether the payment was done on Ethereum, Mastercard or any payment network for that matter.\u201d<\/p><\/blockquote>\n Lane said that while SEC\u2019s claim was an interesting one, he added that even if Balina\u2019s lawyers don\u2019t contest the issue of jurisdiction, it\u2019s not going to have any impact on future cases for now:<\/p>\n \u201cThe defense may concede jurisdiction here, and if they do it won\u2019t be an issue, and if it\u2019s not a contested issue then the court won\u2019t say anything about it. Any concern about legal precedent at this stage is premature.\u201d<\/p><\/blockquote>\n Related: <\/em><\/strong>3 cloud providers accounting for over two-thirds of Ethereum nodes: Data<\/em><\/strong><\/a><\/p>\n The SEC has been previously critisized for its regulatory approach towards crypto<\/a>, which has been labelled by some as “regulation by enforcement.” <\/p>\n SEC Chairman Gary Gensler recently hinted that Ether-based staking could also trigger U.S. securities laws<\/a> shortly after Ethereum transitioned to proof-of-stake on Sept. 15.<\/a><\/p>\n Responding to the lawsuit, Balina said in a 19-part Twitter thread that the charges were \u201cbaseless\u201d and that he \u201cturned down settlement so they [SEC] have to prove themselves.\u201d<\/p>\n 1\/ Official Statement on the baseless SEC charges regarding Ian Balina being compensated for promoting Sparkster:<\/p>\n The SEC Enforcement Division’s proposed charges against Mr. Balina are an unfounded effort based upon multiple misconceptions of fact and law, enumerated below.<\/p>\n \u2014 Ian Balina (@DiaryofaMadeMan) September 19, 2022<\/a><\/p><\/blockquote>\n Balina did not comment on the SEC\u2019s claim that the U.S. should be afforded jurisdiction for Ethereum-based transactions because of the heavy distribution of nodes situated in the U.S.<\/p>\n Balina\u2019s charges come as Sparkster and its CEO, Sajjad Daya recently settled<\/a> its case with the SEC on Sept. 19, having agreed to pay back $35 million to \u201charmed investors\u201d following its ICO in 2018.<\/p>\n<\/div>\n\n