Tron Challenges SEC Lawsuit, Citing “Predominantly Foreign Conduct”

The legal battle between the United States Securities and Exchange Commission (SEC) and the Tron Foundation, the entity behind the layer-1 blockchain, has taken a significant turn as the firm files a motion to dismiss the SEC’s lawsuit. 

Tron argues that the SEC’s attempt to apply U.S. securities laws to what it deems “predominantly foreign conduct” exceeds the regulator’s jurisdictional boundaries.

In its motion filed on March 28 in a New York federal court, Tron vehemently opposed the SEC’s allegations regarding the sale of Tron (TRX) and BitTorrent (BTT) tokens as unregistered securities offerings. 

Tron Slams the SEC

Tron, headquartered in Singapore, emphasized that the token sales occurred entirely overseas, deliberately avoiding the U.S. market. Moreover, the blockchain asserted that the SEC did not provide evidence that the tokens were initially offered or sold to U.S. residents.

The motion challenges the SEC’s authority over foreign digital asset offerings and contests the classification of TRX and BTT tokens as investment contracts under the U.S. securities classification, known as the Howey test. Tron argues that even if the SEC had jurisdiction, the tokens do not meet the criteria for investment contracts.

Tron Rebuts Allegations Against Justin Sun

Tron also rebuts allegations against its founder, Justin Sun, dismissing claims of manipulative wash trading and celebrity endorsements as lacking substantial evidence. The Foundation further contends that the SEC’s lawsuit lacks specificity, with vague allegations and generalizations undermining the claims made against the defendants.

Furthermore, Tron invokes the major questions doctrine, a Supreme Court precedent that restricts regulators’ authority in the absence of explicit congressional delegation. This argument aligns with similar strategies employed by other cryptocurrency firms, including Kraken and Coinbase, in their attempts to dismiss SEC lawsuits.

2 Weeks to Respond

The SEC now has two weeks to respond to Tron’s motion. As of now, the SEC has not issued an immediate comment regarding Tron’s dismissal motion.

The outcome of this legal dispute could have significant ramifications for the regulatory oversight of digital asset offerings and the extraterritorial reach of U.S. securities laws. 

Tron’s challenge underscores the complexities of jurisdictional issues in the global cryptocurrency landscape and raises questions about the extent of regulatory authority in an increasingly interconnected digital economy.

Funding From Congress

The US SEC is seeking an additional $158 million, bringing its total budget to $2.594 billion, up from $2.436 billion in 2024, and aims to crack down on digital asset platforms. 

Gensler pointed to the “Wild West” nature of the crypto markets, characterized by noncompliance and speculative behavior, posing risks to investors’ assets.