SEC Claims US Government Has Jurisdiction Over Ethereum Network

Sahana Kiran
Source – Unsplash

Ethereum [ETH] has been one of the most talked-about cryptocurrencies over the past few weeks, with major updates like the Merge taking place. The network’s transition into proof-of-stake [PoS] has been fueling rumors about ETH being categorized as a security. Now, further strengthening this argument, the SEC in a lawsuit against crypto influencer Ian Balina claims that ETH transactions automatically fall under the US government’s jurisdiction. This is apparently due to the majority of nodes being run in the country.

Balina was sued for allegedly offering unregistered tokens. He was caught in trouble after he failed to register his project as a security before rolling out an initial coin offering [ICO] in 2018. The crypto influencer outrightly denied these claims. However, the crypto community is currently speculating on SEC’s massive statement in the lawsuit. According to the 69th paragraph, the lawsuit stated that it had the right to sue Balina because the SEC had jurisdiction over the Ethereum network.

Reports show that many U.S. investors took part in the Balina investment pool. A network of Ethereum blockchain nodes further verified a number of ETH contributions. Due to this, the SEC stated,

“ETH contributors were validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States.”

Additionally, at present, 42.56 percent or 3340 of the 7819 Ethereum nodes reside in the US.

Will this statement take a toll on the Ethereum network?

The Ethereum network has been dealing with immense backlash following the Merge. As mentioned earlier, some were suggesting that the network would fall under the SEC’s purview as it would now be considered a security. A few others on the other hand were taking digs at ETH’s level of decentralization.

Amidst all of this, the latest statement made by the SEC would be detrimental to the network. Even though several legal professionals noted that the complaint’s phrasing would have no legal significance, it would nevertheless be noticed.