- The SEC claims that jurisdiction over ETH falls under the purview of the U.S. government.
- SEC states why the jurisdiction over ETH should remain under the purview of the U.S. government.
- Brian Fyre doubts the court will stand by the SEC’s claim, but skepticism is as large as life.
The U.S. Security Exchange Commission (SEC) claims that jurisdiction over Ethereum remains under the U.S. government’s purview following the lawsuit filed against crypto influencer and CEO of Token Metrics, Ian Balina. The subject was sued on Monday for failing to register his cryptocurrency as a security before the Initial Coin Offering (ICO) in 2018.
Although the case appeared run-of-the-mill at first, since the SEC had been filing lawsuits against individuals and companies for unregistered ICO issues, this case took a different path.
The SEC’s bold and unprecedented claim in the 69th paragraph of the lawsuit was a pivotal highlight that drew the attention of many.
In the 69th paragraph of the lawsuit, the SEC states :
The U.S. based investors in Balina’s pool irrevocably committed to the transaction when from within the United States, at that point, their ETH contributions 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.
The SEC argued in the complaint that it had the right to sue Balina not only because the transactions happened in the U.S. but also because the majority of all ETH nodes (45-85%) that validate transactions are in the U.S., which intuitively falls under the purview of the U.S. government.
This notion raised alarms in the crypto community and some responded on Twitter:
There it is
The supermassive black hole sized bad take at the heart of the Balina filing
— laurence (new york variant) (@functi0nZer0) September 19, 2022
Brian Fyre, a law professor at the University of Kentucky, stated that although the language of the complaint doesn’t have the legal weightage for the court to stand by it, he is skeptical about it.
While Fyre thinks so, SEC Chair Gary Gensler thinks that Ethereum’s transition to proof-of-stake would bring Ethereum closer to the definition of security through the government’s lens. Subsequently, Ian Balina submitted a response to point out the SEC’s baseless charges in this case.