SEC finds way to regulate the Ethereum network under US laws

The commission’s staff said that most of the transactions on the blockchain take place within the United States

20.09.2022 - 07:30

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What’s new? In a lawsuit against crypto influencer Ian Balina, the Securities and Exchange Commission (SEC) said that the Ethereum network falls entirely under the jurisdiction of the United States. The regulator accuses Balina of failing to register his cryptocurrency Sparkster (SPRK) as a security before the 2018 initial coin offering (ICO). In the complaint, the regulator noted that the assets sent to the accused 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,” so state laws apply to those transactions.

Lawsuit against Balina

More details on the situation. The regulator probably believes that if the majority of Ethereum nodes are concentrated in the US, then all transactions on the network should be considered of American origin. According to Etherscan, as of September 20, 46,19% of blockchain nodes are located in the United States, with Germany in second place at 18,68%.

University of Kentucky law professor Brian Fyre in an interview with Decrypt said that the current situation allows the SEC “to characterize doing business on the Ethereum blockchain, as doing business on a US securities exchange.”

SEC Chair Gary Gensler previously stated that after the network switches to PoS, the Ethereum coin may be classified as a security under the Howey test. The head of the commission noted that the new staking feature allows investors to receive income from the work of third parties, which is one of the signs of a security.

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