In a sudden but predictable overreach of authority, the U.S. Securities and Exchange Commission (SEC) has claimed jurisdiction over Ethereum, and all the transactions on its network.
A clause for concern
Initial Coin Offering (ICO) influencer Ian Balina is facing regulatory action from the SEC, but the ramifications of the case may go further, if the outcry on crypto Twitter has any foundation.
In a filing made on Monday, the SEC alleges that Balina was paid to promote Sparkster (SPRK) tokens but failed to disclose his own financial interest. Sparkster raised $30 million in 2018, at the tail end of the crowdfunding boom and bust cycle known as ICO mania.
While Balina’s shameless self-enrichment remains news to absolutely nobody, the grounds by which the regulator has claimed its jurisdiction over the matter has raised more than a few eyebrows.
Clause 36 of the SEC filing states that:
“The U.S.-based investors in Balina’s pool irrevocably committed to the transaction when, from within the United States, they sent their ETH contributions to Balina’s pool. 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.”
In response to the action, crypto investor Lark Davis tweeted on Monday, “SEC trying to claim jurisdiction over all #ethereum transactions since about 45% of the nodes are in the USA. Thus, all transactions globally should be considered of US origin! YIKES!!! Scary precedent.”
Davis was not alone in his conclusions.
“Rather than take on a simple case, the SEC is trying to use this to set precedent claiming that ALL OF CRYPTO is under SEC’s jurisdiction,” said industry commentator Adam Cochrane on Monday. “This is an absolutely unacceptable overstep that will have to be pushed back against aggressively.”
Secure and settled
Just last week, SEC Chair Gary Gensler provoked considerable industry controversy by claiming that post-Merge Ethereum looks like a security. According to the SEC chief, Ethereum’s “staking” mechanism looks very similar to lending.
That may be a legal fight for another day, even as the financial body successfully closes another. On Monday Be[In]Crypto reported that Sparkster had reached a $35 million settlement with the SEC. The victory comes with a caveat however, as Ian Balina has stated his intention to fight the regulator.
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