The entity behind layer-1 blockchain Tron has urged a New York federal court to dismiss a lawsuit against it brought by the United States Securities and Exchange Commission (SEC).
Tron has argued that the regulator is attempting to target predominantly foreign conduct and that it isn’t a worldwide regulator.
Tron Seeks Dismissal Of SEC Lawsuit
Tron sought the dismissal in a request under a New York-based federal court. The company asserted that the court must dismiss the lawsuit the Securities and Exchange Commission filed as the regulator was targeting largely foreign conduct. Tron noted that the Securities and Exchange Commission is not a global regulator, arguing that its endeavor to implement US securities-related laws to mostly foreign conduct is extreme.
“The SEC is not a worldwide regulator, and its effort to apply US security laws to predominantly foreign conduct goes too far.”
Tron argued in its motion that the Securities and Exchange Commission’s case is against foreign digital asset offerings to foreign purchasers on global platforms, for which it had no authority. Tron claimed the tokens in question were sold overseas, with several steps taken to avoid the US markets, arguing that the commission did not allege they were offered or sold initially to US residents.
SEC’s Claim Tenuous At Best
Tron argued that the Securities and Exchange Commission’s claim that later secondary token sales on US-based platforms serving users worldwide were unregistered US securities was tenuous at best. According to Tron, even if the Securities and Exchange Commission had the authority, the tokens don’t classify as investment contracts under the Howey test.
The SEC also alleged that Tron founder Justin Sun engaged in manipulative wash trading, in which a single entity buys and sells a token to stimulate market activity. It also alleged that Sun secretly paid celebrities like Akon and Soulja Boy to promote tokens.
“No particularized facts show that the trades were actually ‘wash trades,’ wrongfully executed for illegitimate purposes (much less affecting anyone in the United States). The SEC also does not allege a single victim.”
Tron also pointed out that the SEC had failed to detail factual allegations that lay out each defendant’s role in each claim, instead relying on generalizations and conclusions to support its claims.
“For example, although the SEC purports to allege fraud, no material misstatement is alleged, leaving Defendants (and the Court) to speculate on the precise basis for those claims.”
Tron also argued that the case should be dismissed under the doctrine of major questions. The major questions doctrine is a Supreme Court ruling that states that Congress will pass laws and not give authority to regulators. Several other crypto firms, including Kraken and Coinbase, have cited the same in similar dismissal bids.
The Securities and Exchange Commission had sued Justin Sun, the Tron Foundation, file-sharing platform backers BitTorrent Foundation, and its parent firm, Rainberry Inc. in March 2023.
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