Monday, the SEC filed a federal lawsuit against crypto influencer Ian Balina for his failure to register a cryptocurrency as a security before launching a 2018 initial coin offering (ICO). Not an unusual lawsuit; the SEC is in the practice of suing purveyors of ICOs it believes fall under its jurisdiction. However, buried in the 69th paragraph of the filing was the following:

“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.”

It looks like the SEC is saying that because a majority of Ethereum nodes are located in the U.S., transactions on Ethereum should be considered to be of U.S. origin. According to University of Kentucky law professor Brian Fyre, “Saying that enables [the SEC] to characterize doing business on the Ethereum blockchain, as doing business on a U.S. securities exchange.”

Our own legal consultant told me that this particular writing will have no legal weight, so there’s a difference of opinion as to how serious this might be for ETH hodlers and traders. But… does the wording in this document foreshadow the SEC’s thinking? That would be a very big deal.

Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it.

About Shelly Palmer

Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and writes a popular daily business blog. He's a bestselling author, and the creator of the popular, free online course, Generative AI for Execs. Follow @shellypalmer or visit shellypalmer.com.

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