SEC Claims All of Ethereum Falls Under US Jurisdiction

When the SEC filed a federal lawsuit on Monday To crypto influencer Ian Ballina It all seemed mundane at first because it didn’t register the cryptocurrency as a security before launching its initial coin offering (ICO) in 2018: the SEC many yearsfiled a civil suit against an individual or organization for unregistered deployment ICOs.

A keen observer will read the fine print a little further.

In a bold and potentially unprecedented move buried in paragraph 69 of the lawsuit, the SEC today claimed it had the right to sue Ballina. The reason is that not only does his lawsuit relate to transactions that took place in the United States, but in essence: ethereum The network is under the jurisdiction of the United States Government.

among them Complaint, the regulator said that ETH sent to Ballina was verified by a network of nodes on the Ethereum blockchain that is more densely populated in the United States than in any other country. The SEC has concluded that “as a result, these transactions were conducted in the United States.”

With more of Ethereum’s validating nodes currently operating in the United States than in any other country, the SEC seems to suggest that: all Ethereum transactions around the world should be considered of American origin. Currently, 45.85% of all Ethereum nodes are operated from the United States, according to EtherscanBy comparison, Germany has the second highest density of nodes at just 19%.

“Say it will be possible [the SEC] To characterize doing business on the Ethereum blockchain like doing business on a U.S. stock exchange, said Brian Fire, a University of Kentucky law professor. Decryption“From their regulatory standpoint, this is convenient. It makes things so simple.”

SEC will monitor activity on Ethereum, In the case of the American stock exchange, that would mean the regulator asserting jurisdiction over all activity on the ostensibly decentralized Ethereum network. constitutes a significant escalation of the SEC’s role to NFT and DeFi activity Entire encryption takes place.

Fyre said the language in today’s complaint carries no legal weight, and the nature of the SEC’s case against Ballina makes it unlikely that the court will intervene in this particular issue. But that doesn’t mean the statement doesn’t make sense.

I think they may be trying to bring their vision of what Ethereum is and how it works into the legal ecosystem, said Fyre. Decryption“The SEC is saying, ‘This entire financial activity is within the scope of what we regulate, so we intend to regulate it all.'”

Fyre believes such a full-fledged claim to control the entire Ethereum ecosystem is unprecedented.

This is the first time I have seen the SEC actually explain how they understand how the Ethereum ecosystem works and why they think it is within the scope of SEC regulation. He said.

Last week, Ethereum Successful merge Proof of Stake Consensus Mechanism, SEC Chairman Gary Gensler Allusions This shift could bring the network closer to the government’s definition of security.

Following his testimony before the Senate Banking Committee, Gensler argued that “staking” (i.e., pledging assets into a cryptocurrency network in exchange for a passive reward) meant that assets could be traded as securities under the so-called Howie Act. I have provided my view on how it is interpreted as an indication of eligibility. He didn’t mention a specific cryptocurrency or network by name, but he tested it.

Fyre doesn’t think it’s a coincidence that the statement is similar to today’s statement.

“[Todays language] It seems perfectly in line with what Gensler was getting in his statement […] The SEC considers all of these to be securities and therefore will make regulatory decisions related to the entire ecosystem,” said Fyre.

Under Gensler, the SEC believes that leadership within the committee under the previous administration will allow Ethereum to well decentralized So its not security. But if the SEC claims Ethereum is an unregistered security, Fyre suspects the courts will block it.

I am sure the judges have fully accepted it. Ethereum is effectively in the US as long as it runs on many computers and those many computers are in the US, Fyre said. . “It’s what’s happening in the United States. No problem.”