Tron Foundation Fights SEC's Global Reach in New York Court

On March 28, Tron Foundation urged a New York federal court to dismiss the SEC's lawsuit, arguing that the SEC overreaches by targeting actions primarily occurring outside the U.S. Tron contends that its token sales were conducted overseas, avoiding the U.S. market and falling outside the SEC's regulatory jurisdiction.

Tron Foundation Challenges SEC's Extraterritorial Reach in New York Court

New York, March 28, 2023 - The Tron Foundation has filed a forceful motion to dismiss a lawsuit initiated by the U.S. Securities and Exchange Commission (SEC), arguing that the regulatory agency has overstepped its authority by targeting actions that primarily occurred outside the United States.

SEC's Allegations and Tron's Contentions

Last year, the SEC filed a complaint against Tron, alleging that the sale of its TRX and BTT tokens constituted unregistered securities offerings. The lawsuit also implicated the BitTorrent Foundation and Rainberry Inc., both affiliated with Tron since their 2018 acquisition.

However, Tron, headquartered in Singapore, maintains that its token sales were conducted overseas, specifically avoiding the U.S. market, and thus fall outside the SEC's regulatory jurisdiction. The foundation contends that the secondary sales of tokens on U.S.-based platforms do not, by themselves, transform them into unregistered U.S. securities.

Challenging the SEC's Application of the Howey Test

Tron's motion challenges the SEC's application of the Howey test, which is used to define investment contracts. The foundation argues that the SEC's interpretation of the test is overly broad and would categorize virtually any digital asset offering as a security.

Refutation of Manipulative Market Practices

Moreover, Tron refutes the SEC's allegations of manipulative market practices, such as "wash trading" by its founder Justin Sun and undisclosed token promotion by celebrities. The motion emphasizes that the SEC has failed to provide specific facts or identify identifiable victims to support these claims.

Questioning SEC's General and Unspecified Allegations

Tron also criticizes the SEC for its general and unspecified claims against the defendants, including a lack of concrete allegations of fraud. The foundation asserts that the SEC's complaint is insufficient to establish a valid cause of action.

Invoking the Major Questions Doctrine

Tron's motion invokes the major questions doctrine, which requires explicit congressional authorization for regulatory actions that have significant economic or political implications. The foundation argues that the SEC's extraterritorial enforcement of U.S. securities laws raises such major questions and requires express congressional authorization, which is lacking in this case.

SEC's Expected Response and Market Update

The SEC is expected to respond to Tron's dismissal motion within the next two weeks. As of this writing, TRX is trading at around $0.1216 (down 0.7%), while BTT is trading at approximately $0.000001571 (down 2.8%).

Tron's legal battle with the SEC is being closely watched by the cryptocurrency industry. The outcome has the potential to shape the regulatory landscape for digital asset offerings and establish limits on the SEC's extraterritorial reach.