SEC Authority Contested in Tron Dismissal Motion

Tron Foundation contests the authority of the U.S. Securities and Exchange Commission (SEC) to regulate its activities in a dismissal motion filed in a New York federal court. Tron argues that the SEC's lawsuit, which alleges unregistered securities offerings, focuses on "predominantly foreign conduct" beyond its jurisdiction. The foundation maintains that its token sales were made "exclusively abroad" with safeguards against US market participation.

SEC Authority Challenged in Tron Dismissal Motion

New York, March 28, 2023 – The Tron Foundation has filed a motion to dismiss a lawsuit brought by the United States Securities and Exchange Commission (SEC), arguing that the regulator lacks jurisdiction over the company's alleged unregistered securities offerings.

The SEC's lawsuit, filed in March 2022, alleges that Tron, along with its founder Justin Sun, BitTorrent Foundation, and Rainberry Inc., sold unregistered securities in the form of Tron (TRX) and BitTorrent (BTT) tokens. The SEC claims that these tokens were offered to U.S. investors without proper registration.

However, Tron's dismissal motion contends that the SEC's allegations are flawed because the token sales were conducted solely outside the United States. The motion argues that the SEC has no authority to regulate the sale of digital assets to non-U.S. investors on foreign platforms.

"The SEC is not a global regulator," the Tron Foundation asserted in its motion. "Its attempt to extend U.S. securities laws to predominantly foreign conduct goes too far."

Tron further claims that the tokens were not offered or marketed to U.S. investors and that the SEC has not alleged that any U.S. residents purchased the tokens initially. The company also disputes the SEC's characterization of secondary token sales on U.S.-based platforms as unregistered securities, arguing that such sales are not subject to U.S. securities laws.

Furthermore, Tron argues that even if the SEC had jurisdiction, the tokens do not meet the definition of investment contracts under the Howey Test, which is the legal framework used to determine whether an asset is a security.

The Tron Foundation also takes issue with the SEC's allegations of manipulative wash trading and celebrity endorsements. The motion argues that the SEC has not provided specific evidence to support these claims and has failed to identify any victims.

In addition to these arguments, Tron contends that the SEC's complaint lacks sufficient factual detail and relies on generalizations and conclusions. The company asserts that the SEC has failed to adequately allege the specific roles of each defendant in the alleged misconduct.

Tron also argues that the case should be dismissed under the major questions doctrine, which limits the ability of regulators to exercise authority that has not been specifically granted by Congress. The company argues that the SEC's attempt to regulate the sale of digital assets outside the United States raises a major question that should be resolved by Congress, not by the agency.

The SEC has not yet filed its response to Tron's dismissal motion. The agency has two months to do so.

The Tron Foundation's dismissal motion highlights the ongoing debate over the SEC's authority to regulate digital assets. The agency has taken a proactive approach to regulating cryptocurrencies and other digital assets, but some companies argue that the SEC is overstepping its bounds. The outcome of this case could have significant implications for the future of cryptocurrency regulation in the United States.