SEC Claims that All Ethereum is Under U.S. Jurisdiction

The SEC makes an audacious claim that Ethereum falls under U.S. jurisdiction due to the “cluster” of ETH nodes.
Ethereum (ETH) investors warned that the Merge upgrade could see the SEC classify the digital asset as a security.

In an unprecedented move, the SEC has claimed that all Ethereum transactions fall under U.S. jurisdiction. The watchdog seemed to suggest that since there was a cluster of ETH validating nodes in the country, all Ethereum transactions’ points of origin should be considered as the U.S.

Etherscan data shows that roughly 48% of Ethereum nodes operate from the U.S. This establishes it as the most dominant country with Ethereum transactions depending on it.

The claim by the SEC was established in a lawsuit against crypto researcher and YouTuber Ian Balina. The influencer is accused by the agency of selling unregistered securities in the form of Sparkster (SPRK) tokens back in 2018. Since Balina received contributions of ETH through ETH nodes “which are clustered more densely in the United States than in any other country,” this means the transactions took place in the U.S.

By making this claim, the SEC is characterizing transactions on the Ethereum blockchain like doing business through a U.S securities exchange.

There it is

The supermassive black hole sized bad take at the heart of the Balina filing

h/t @LordBogdanoff https://t.co/ZopOGQchU4 pic.twitter.com/ucn5sZkK5b

— laurence (@functi0nZer0) September 19, 2022

In recent years, the SEC has sued numerous high-profile individuals and companies for offering unregistered securities in the form of ICOs. Most notably is its lawsuit against Ripple and its executives Brad Garlinghouse and Chris Larsen. The agency has further warned that there are potentially thousands of other securities masquerading as cryptocurrencies, only singling out Bitcoin as a cryptocurrency making it a digital asset.

Despite the recent events, Ethereum (ETH) prices remain unshaken with the digital asset recording a 4% rise in the last 24 hours. However, this remains a long way from investors’ expectations post-merge.

Is Ethereum under investigation?

Since the Ripple lawsuit began, the SEC and its hierarchy have avoided any comments on whether ETH is a security. But since the successful completion of the Ethereum Merge about a week ago, SEC Chair Gary Gensler has since implied that the upgrade might have brought the digital asset closer to being classified as a security.

Gary Gensler said that proof of stake cryptocurrencies could be classified as securities according to a Wall Street Journal. In his view, blockchains that allow holders to earn through staking could pass the Howey test. By this logic, Cardano and Solana could also find themselves under the wrath of the SEC.