Remember that distance is aproximated. For example my internet connection (most common Internet Service and ISProvider in my country btw) registers as being used from town around 15 km / 9 miles away. Used to be 30 km / 18 miles but they must have placed new hub somewhere closer to me. So its not THAT good.
also remember, that with just one location, you get only a vague information - an arc spanning whole country. You would need to triangulate the position using more than one location for it to be at least a bit accurate.
What I'm more concerned about is that this game is direct P2P so... players in lobby can easily spoof each others IP adresses. This could possibly lead to sniffing open, unprotected ports and other system holes. Thats one of many reasons why services which theoreticaly do not need centralized server often use it anyway at least as a proxy for clients to comunicate.