The Tron Foundation, responsible for the layer-1 blockchain Tron, has filed a motion with a New York federal court to dismiss a lawsuit brought by the United States Securities and Exchange Commission (SEC), contesting the regulator’s attempt to govern activities primarily outside the U.S.
In a statement on March 28, Tron emphasized, “The SEC is not a worldwide regulator,” criticizing the SEC’s endeavors to enforce U.S. securities laws on actions that mainly occur abroad.
In March of the previous year, the SEC launched legal action against Justin Sun, the founder of Tron, alongside the BitTorrent Foundation, and Rainberry Inc., its parent company based in San Francisco, which Tron acquired in 2018.
The SEC’s lawsuit alleges that the sale of Tron and BitTorrent (BTT) tokens constituted unregistered securities offerings.
Tron, headquartered in Singapore, argues in its dismissal motion that the SEC’s lawsuit targets “foreign digital asset offerings to foreign purchasers on global platforms,” over which the SEC lacks jurisdiction.
The foundation asserts that the token sales occurred entirely outside the United States and were specifically designed to exclude the U.S. market, pointing out that the SEC failed to prove any initial sales to U.S. residents.
Furthermore, Tron disputes the SEC’s claim regarding subsequent secondary sales of tokens on U.S.-based platforms, labeling these allegations as “tenuous at best.”
It also challenges the notion that the tokens meet the criteria for investment contracts under the Howey test, a standard for defining securities in the U.S.
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In addition, the SEC accuses Justin Sun of engaging in deceptive trade practices, including “manipulative wash trading” and undisclosed payments to celebrities like Soulja Boy and Akon for promotion.
Tron counters these accusations by stating the SEC has not substantiated these claims with specific facts, particularly any that would imply victims in the United States.
Tron further criticizes the SEC for its broad allegations and lack of detailed factual claims, suggesting that the accusations against it rely too heavily on generalizations and fail to outline the precise basis for fraud claims.
The foundation also invokes the major questions doctrine, arguing that the case should be dismissed based on principles that regulatory authority must be explicitly granted by Congress, a stance previously taken by other crypto entities in similar disputes with the SEC.
The SEC is expected to respond to Tron’s dismissal motion within two weeks, though the commission had not commented on the motion at the time of the report.
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