Tron takes a stand against SEC lawsuit, defending the principle of decentralization
Tron Foundation, the organization responsible for the Layer 1 blockchain network Tron, has requested the dismissal of a securities lawsuit filed against the platform by the United States Securities and Exchange Commission (SEC).
In a dismissal motion filed on March 28, the Tron Foundation argued that the SEC is not a global regulator and has overstepped its boundaries by trying to apply U.S. securities laws to predominantly foreign actions.
Tron stated that the SEC’s case concerns foreign digital asset offerings to foreign users on a global platform. Since the firm is based in Singapore, it claims that the SEC has no jurisdiction in these matters.
The SEC filed a lawsuit against the Tron Foundation in March 2023, naming the firm’s CEO and founder, Justin Sun, as well as the Bittorrent foundation and Bittorrent’s parent company, Rainberry Inc., which were acquired by Tron.
The regulator alleged that Tron’s TRX token and BitTorrent’s BTT token were securities, and accused the defendants of selling unregistered securities offerings. This aligns with the SEC’s consistent approach to such cases.
In the dismissal motion, Tron asserted that its token sales were conducted entirely overseas and that it took additional measures to avoid the U.S. market. The motion also pointed out that the SEC’s lawsuit does not claim that the tokens were initially offered or sold to U.S. residents.
Furthermore, Tron argued that the SEC’s assertion that the sale constituted an unregistered securities offering is weak, at best. The foundation also contended that the investments do not meet the Howey test’s criteria for classification as investment contracts.
Tron’s motion also addressed the SEC’s allegations of manipulative wash trading by Tron founder Justin Sun. The regulator also claimed that Sun secretly paid celebrities like Soulja Boy and Akon to promote the tokens.
In its defense, Tron argued that there is no evidence to support the claim that the trades were actually wash trades executed for illegitimate purposes, nor does the SEC allege any victims.
The motion further criticized the SEC for its lack of specific details regarding the factual allegations and the role of each defendant in the claims. Tron accused the regulator of making generalizations and drawing conclusions to support its already weak and often indiscernible claims.
To argue for the dismissal of the lawsuit, Tron invoked the major questions doctrine, which emphasizes that legislative powers lie with Congress, not regulatory agencies. This approach has previously been used by Coinbase in its lawsuit against the SEC.
With Tron’s formal request for dismissal submitted, the SEC is expected to respond in the coming weeks.
