Tron’s Argument Against SEC’s Global Authority

Tron Foundation, the entity behind the layer-1 blockchain Tron, has requested the dismissal of a lawsuit filed against it by the US Securities and Exchange Commission (SEC). The foundation argues that the SEC is overreaching its authority by applying US security laws to predominantly foreign conduct. The SEC sued Tron Foundation, its founder Justin Sun, the BitTorrent Foundation, and Rainberry Inc. last year, alleging that the sale of Tron (TRX) and BitTorrent (BTT) tokens were unregistered securities offerings. Tron contends that the SEC’s case is in relation to foreign digital asset offerings made to foreign buyers on global platforms, which fall outside of the SEC’s purview.

Tron maintains that the tokens were sold entirely overseas and steps were taken to avoid the US market. The SEC did not allege that the tokens were initially offered or sold to any US residents. Tron argues that the secondary token sales that took place on a US-based platform serving users worldwide do not constitute unregistered US securities. Tron further claims that even if the SEC had authority, the tokens would not be classified as investment contracts under the US securities classification test, known as the Howey test.

The SEC also accused Justin Sun of engaging in manipulative wash trading and paying celebrities to promote the tokens. Tron disputes these claims, stating that there is no evidence to support the allegation of “wash trades” and that the trades did not have an impact on any individuals in the US. Tron argues that the SEC has failed to provide detailed factual allegations and that its claims are based on generalizations and conclusions.

Tron also asserts that the case should be dismissed under the major questions doctrine, which states that Congress, not regulators, should have the authority to pass laws. Other cryptocurrency firms, such as Kraken and Coinbase, have previously cited this doctrine in their bids to dismiss SEC lawsuits. The SEC has two weeks to respond to Tron’s dismissal motion.