Key Points
- The Tron Foundation has requested the SEC to dismiss a securities lawsuit against it.
- The foundation argues that the SEC has overstepped its jurisdiction, applying U.S. laws to predominantly foreign conduct.
The Tron Foundation, the entity behind the Layer 1 blockchain network Tron, has petitioned the U.S. Securities and Exchange Commission (SEC) to terminate a securities lawsuit against it.
In a dismissal motion dated March 28, the foundation argues that the SEC does not function as a global regulator. The Tron Foundation contends that the SEC is overreaching by trying to enforce U.S. securities laws on activities that are primarily overseas.
SEC Lawsuit Against Tron
Tron argues that the SEC’s case targets foreign digital asset offerings on a global platform to foreign users. The foundation, based in Singapore, maintains that the SEC does not have jurisdiction over these matters.
The SEC initiated a lawsuit against the Tron Foundation in March 2023. The lawsuit also implicated the company’s CEO and founder, Justin Sun, along with the Bittorrent foundation and its San Francisco-based parent company, Rainberry Inc., both of which Tron acquired.
The SEC alleges that Tron’s TRX token and BitTorrent’s BTT token are securities. Consequently, the defendants are charged with conducting unregistered securities offerings sales, a recurring trend in SEC cases.
Tron’s Defense
In its motion, Tron asserts that its token sales were conducted entirely overseas and took extra measures to avoid the U.S. market. The foundation also points out that the SEC’s lawsuit does not claim that the tokens were initially offered or sold to U.S. residents.
The foundation further argues that the SEC’s claim of an unregistered securities offering is weak at best. It contends that the investments would not meet the criteria of investment contracts under the Howey test.
The lawsuit also addresses the SEC’s allegations that Tron’s founder, Justin Sun, was involved in manipulative wash trading. The SEC further claims that Sun covertly paid celebrities such as Soulja Boy and Akon to endorse the tokens.
In its defense, Tron maintains that there is no proof that the trades were actually ‘wash trades,’ wrongfully executed for illicit purposes, particularly affecting anyone in the U.S. The foundation also points out that the SEC does not allege a single victim.
The motion also emphasizes that the SEC failed to provide specifics about factual allegations and each defendant’s role in these claims. It accuses the regulator of making generalizations and drawing conclusions to back its often indistinguishable claims.
According to Tron, this lack of clarity forces both the defendants and the court to speculate about the basis of these allegations, thereby challenging the legitimacy of the lawsuit itself.
In its argument for the lawsuit’s dismissal, Tron invokes the major questions doctrine, a legal principle that asserts that legislative powers rest with Congress, not regulatory agencies. This strategy was previously used by Coinbase in its lawsuit against the SEC.
With Tron’s formal dismissal request now filed, the SEC is anticipated to submit a counter-response in the upcoming weeks.
