When Jurisdiction Rules Meet Blockchain: Can the Old Bottle Contain the New Wine?

Abstract

The distributed nature of blockchain poses challenges to the existing legal system, notably the jurisdiction rules addressing court jurisdiction and governing laws. The In re Tezos case, a securities law dispute brought in the District Court of Northern District of California of the United States, was the case facing this particular challenge. In this paper, I conduct a case study of the In re Tezos case to illustrate how the distributed nature of blockchain impacts the determination of court jurisdiction and governing law in the securities regulation context. I argue that while the internet has already complicated those effect-based jurisdiction rules, blockchain further complicated those conduct-based jurisdiction rules. With this understanding, I offer several principles for addressing the jurisdiction issues in cases involving blockchain-based securities. Specifically, I propose an effect-based jurisdiction rule limited by a de minimis exception to mitigate blockchain’s impact, enhance legal certainty, and promote international coordination.

Keywords: blockchain, jurisdiction, securities regulation, initial coin offering, ICO, In re Tezos, Morrison transaction test, conduct test, effect test