Lawsuit Suggests US Jurisdiction Over Ethereum

Does the United States have jurisdiction over the Ethereum blockchain?

A lawsuit by the Securities and Exchange Commission (SEC) could be suggesting that, Bloomberg reported Tuesday (Sept. 20).

The suit — filed Monday (Sept. 19) in federal court in Austin — is against the founder of a cryptocurrency investment research firm over what the SEC said are undisclosed incentives tied to an initial coin offering.

The filing also detailed the movement of ether tokens in connection to the case, saying the transactions originated in America and “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.”

The SEC was not immediately available for comment Tuesday.

While the Bloomberg report acknowledged that the comment appears deep in the filing, it said the remark still “winks at the possibility” that there’s a case for U.S. jurisdiction over the Ethereum blockchain based on where most of its computing occurs.

“The bigger issue here is the problems over jurisdiction of blockchain activities more generally,” Elizabeth Morton, a research fellow at RMIT Blockchain Innovation Hub, told Bloomberg. “Multiple jurisdictions with their own regulatory frameworks can make independent claims.”

The number of players involved in regulating cryptocurrency can leave companies uncertain about which rules apply, Stephen Gardner, chief legal officer of Zero Hash, a B2B2C cryptocurrency infrastructure provider, told PYMNTS last week.

Read more: Deciphering the Alphabet Soup of Crypto Regulation

“Without guardrails,” Gardner said, companies just want to know “what consumer laws apply — and when — and who is going to be enforcing them. Oftentimes they overlap, and crypto firms must be adept at responding to each of the different regulatory bodies.”

One of the three biggest legal challenges facing the crypto assets industry is “defining clearly which assets are securities, which assets are commodities,” he added.

For all PYMNTS crypto coverage, subscribe to the daily Crypto Newsletter.

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