Tron argued that the SEC lacked global jurisdiction and overstepped its boundaries with the lawsuit.
Tron, the company behind the Tron blockchain, petitioned a federal court in New York to dismiss the lawsuit brought by the Securities and Exchange Commission (SEC), claiming that the U.S. regulator targeted largely international activities beyond its jurisdiction.
According to Tron Foundation’s dismissal motion filed in a New York federal court on March 28th, the SEC overstepped its jurisdiction by seeking to apply U.S. securities laws to actions primarily occurring outside of the country.
The SEC filed a lawsuit last year against prominent blockchain proponent Justin Sun, the Tron Foundation, the BitTorrent Foundation, and Rainberry Inc., the latter two of which Tron acquired in 2018.
The SEC alleged that the sale of Tron and BitTorrent (BTT) tokens constituted an unregistered securities offering, asserting that the companies failed to comply with U.S. securities regulations in their offerings.
Tron, headquartered in Singapore, countered the SEC’s allegations by arguing that the lawsuit targeted transactions involving “foreign digital asset offerings to foreign purchasers on global platforms,” which fell outside the SEC’s jurisdiction.
In its motion, Tron argued that the tokens were sold exclusively outside the U.S. borders, with precautions taken to prevent their entry into the U.S. market. The company asserted that the SEC did not allege that any U.S. residents were initially offered or sold these tokens.
Tron dismissed the SEC’s assertion that subsequent token sales conducted on a U.S.-based platform, serving users worldwide, amounted to unregistered U.S. securities, calling the claim “flimsy at best.”
In other news, Tron has unveiled its bitcoin layer 12 solution and its founder, Justin Sun wants to bring memecoin mania to the Tron blockchain.
Tron also argued that even if the SEC had the necessary authority, the tokens would not have passed the Howey test, a U.S. securities classification test, to be considered investment contracts.
The SEC’s lawsuit not only targeted Tron and its associated entities but also Sun, accusing him of engaging in “wash trading,” a form of market manipulation, and secretly paying celebrities, such as Soulja Boy and Akon, to promote the 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),” Tron wrote in its motion. “The SEC also does not allege a single victim,” it added.
Tron further asserted that the SEC’s case lacked specificity, as it did not sufficiently outline the factual allegations or specify each defendant’s role in the claims. Additionally, Tron criticized the SEC for relying on broad generalizations and conclusions to bolster its already weak and often unclear 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,” it wrote.
Tron’s dismissal motion made use of the major questions doctrine, a recent Supreme Court ruling that holds that significant issues must be addressed by Congress, not regulatory agencies.
This argument, also employed by other crypto firms such as Kraken and Coinbase in their lawsuits against the SEC, asserts that the commission does not have the authority to unilaterally enforce securities laws on crypto projects.
Tron’s dismissal motion is expected to receive a response from the SEC within two weeks. As of now, the SEC has not issued a public statement regarding the motion.
