SEC lawsuit claims ETH nodes are ‘clustered’ in US

The Securities Exchange Commission (SEC) has made an unprecedented claim that Ethereum transactions take place in the United States. ETH nodes are “more dense” in the United States than in any other country.

The SEC dispute is contained in a lawsuit filed on September 19 by crypto researcher and YouTuber Ian Ballina, who, among many complaints, made an unregistered offering of Sparkster (SPRK) tokens when Ballina founded it in 2018 to invest in Telegram.

The SEC said that while US-based investors participated in the whale investment pool, ETH contributions were confirmed by the network of nodes on the Ethereum blockchain, “more concentrated in the United States than in any other country.”

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

At this stage, it is unclear whether such a claim would hold up in court or whether there is a legal precedent at issue. However, 42.56% of the 7807 Ethereum nodes are currently located in the US according to Ethereum nodes.

Dr. Aaron Lane, an Australian lawyer and senior research fellow at the RMIT Blockchain Innovation Hub, told Cointelegraph that the distribution of Ethereum nodes had nothing to do with the issue:

“What’s most important here is that we have a US-based plaintiff, a US-based defendant and transactions flowing from the US. It doesn’t matter whether the payment was made via Ethereum, MasterCard or any other payment network for that matter.

Lane added that while the SEC’s claim is interesting, Ballina’s lawyers are not arguing the case for jurisdiction, so it will have no bearing on future cases for now.

“The defense can grant jurisdiction here, and it won’t be a problem if they do, and if it’s not contested, the court won’t say anything about it. Any concerns about legal precedent at this stage are premature.”

Related: 3 Cloud providers account for more than two-thirds of Ethereum nodes: data

The SEC has previously been criticized for its regulatory approach to crypto, which has been labeled by some as “enforceable regulation”.

SEC Chairman Gary Gensler recently hinted that Ethereum-based staking may trigger US securities laws after Ethereum transitions to certification-intermediate on September 15.

Responding to the allegations, Ballina in a 19-part Twitter thread dismissed the allegations as “baseless” and “rejected the action. [SEC] They must prove themselves.

Ballina did not comment on the SEC’s claim that the US should grant jurisdiction over Ethereum-based transactions due to the high prevalence of nodes in the US.

Ballina claims Sparkster and its CEO Sajjad Daya recently settled their case with the SEC on September 19, agreeing to pay $35 million to “harmful investors” following an ICO in 2018.