The Tron Foundation and Justin Sun, Tron's founder, have called on the United States District Court of the Southern District of New York to dismiss a lawsuit filed by the US Securities and Exchange Commission (SEC).
According to a document filed on March 28, they argue that the SEC has not proven the court's authority over foreign defendants.
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In March 2023, the SEC accused Sun and associated companies—Tron Foundation, BitTorrent Foundation, and Rainberry—of unregistered offer and sale of crypto asset securities and using wash trading tactics to manipulate the secondary market.
The defendants asserted that the SEC's attempt to apply US securities laws to predominantly foreign activities with minimal ties to the US is unjustified. Their memorandum to the court states:
The SEC is not a worldwide regulator. Its efforts to leverage highly attenuated contacts to the United States, to extend US securities laws to cover predominantly foreign conduct, go too far and should be rejected.
Rainberry, a California-registered entity involved in the case, did not challenge the court's authority. Instead, it sought to have the case dismissed on other grounds, including the argument that the defendants were not given proper notice.
Furthermore, the defendants also reference the major questions doctrine to argue that the SEC has overstepped its authority. They stated that Congress is still deciding on the appropriate regulations for digital assets and blockchain participants; therefore, this case is considered too early and should be dismissed.
This legal battle is one of many that the SEC has started against different crypto entities, once again raising debates about the reach of US securities laws.
The SEC has also filed a lawsuit against Coinbase, accusing it of providing trading and staking services without the required regulatory permissions. In a recent update, a New York judge decided that this lawsuit could proceed.
