TRON Foundation asks court to dismiss SEC lawsuit over TRX token trading

What’s new? TRON Foundation, a non-profit organization created to support the blockchain of the same name, has filed a motion to dismiss the US Securities and Exchange Commission’s (SEC) lawsuit. Last March, officials accused TRON Foundation, as well as TRON founder and CEO of crypto exchanges Huobi and Poloniex Justin Sun, of selling and issuing unregistered securities, fraud, and market manipulation. The new filing notes that the SEC’s efforts to regulate activities outside the United States have gone “too far.”

Court documents

What else is known? In the lawsuit, the regulator alleges that the TRON (TRX) native token is an unregistered security and that the defendants manipulated the asset’s secondary market through a wash trading that seeks to artificially inflate trading volume and mislead other market participants about the price or liquidity of the asset.

The BitTorrent Foundation and Rainberry, the parent company of the BitTorrent file-sharing platform, are also defendants in the lawsuit. Claims are also made against the BitTorrent (BTT) token.

In a new motion, the TRON Foundation claims that TRX was sold exclusively outside the United States, and the company took special steps to prevent the asset from reaching the local market. However, the SEC itself does not allege in the lawsuit that the assets were originally offered or sold to US residents.

“This case originates with foreign digital asset offerings to foreign purchasers on global platforms,” the lawyers explain.

Even if the SEC had global regulatory authority, the tokens would not be classified as investment contracts under the US Howey test, the NPO’s representatives said.

The Howey test includes four criteria: investment, common enterprise, reasonable expectation of profit, and the efforts of others. In other words, such a test identifies whether investors expect to realize a return on an investment in an asset through the work of third parties.

As for the market manipulation allegations, TRON pointed out that the SEC did not cite evidence of the fictitiousness of certain transactions or mention any victims of such activity.

The SEC is expected to file a response to the motion within two weeks.

TRON was previously integrated with Amazon Web Services cloud platform, allowing users and developers to quickly and easily run full nodes of the blockchain. The initiative aims to lower the entry barrier for participation in the TRON network, which will contribute to a more decentralized and robust blockchain ecosystem. The launch of TRON-based marketplace Inscriptions was also announced.

In turn, Circle, the issuer of the second most capitalized stablecoin (USDC), announced the termination of support for its asset in the TRON network. Analysts at TRM Labs said that the largest-capitalization stablecoin USDT, issued on TRON, “cemented its position as the currency of choice for use by terrorist financing entities.”