The Tron Foundation is arguing that the lawsuit it is currently facing from the U.S. Securities and Exchange Commission should be dropped, arguing that the SEC is illegitimately attempting to apply U.S. regulations extraterritorially.

In a March 28 dismissal motion filed with a New York federal court, the foundation argued that the U.S. regulator is overstepping jurisdiction in its lawsuit alleging that Tron and BitTorrent engaged in unlicensed securities offerings through their respective token sales.

“The SEC is not a worldwide regulator,” Tron Foundation said. “Its efforts to leverage highly attenuated contacts to the United States, to extend U.S. securities laws to cover predominantly foreign conduct, go too far and should be rejected.”

The Foundation said it took measures to ensure that assets were entirely sold “overseas,” and that the SEC does not hold authority over “foreign digital asset offerings to foreign purchasers on global platforms.” It added that the SEC did not allege that the tokens were “offered or sold initially to any U.S. residents.”

The filing also noted that both Tron Foundation and BitTorrent Foundation are based in Singapore and do not have any offices or employees in the United States. “This action levels a series of hyperbolic ‘securities’ claims against two foreign entities and a foreign national,” it said.

SEC lawsuit

The SEC filed its lawsuit against Tron founder Justin Sun, the Tron Foundation, the BitTorrent Foundation, and Rainberry Inc. in March 2023. The complaint accused Sun and his firms of engaging in the “orchestration of the unregistered offer and sale, manipulative trading, and unlawful touting of crypto asset securities” when selling the Tron (TRX) and BitTorrent (BTT) tokens.

The complaint also took aim at celebrities who failed to disclose that they had been paid to promote the tokens, including Jake Paul, Lindsay Lohan, and Akon — each of whom quickly settled with the SEC for $400,000 — and accused Sun of engaging in more than 600,000 wash-trades to inflate the price of TRX between April 2018 and February 2019.

“Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities,” said Gurbir Grewal, director of the SEC’s Division of Enforcement. “At the same time, Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they not disclose their compensation.”

The new filing from Tron Foundation refutes the alleged wash-trading, stating that “no particularized facts” show that the trades in question comprised wash-trades or impacted any U.S.-based individuals.

Rival Layer 1s close the gap between Tron

While Tron continues to rank as the second-largest smart contract network by total value locked (TVL), other networks are catching up fast.

Tron currently boasts a TVL of $9.86 billion after tagging an all-time high of $10.5 billion three weeks ago, marking growth of 26% in the past two months, according to DeFi Llama.

Solana is catching up fast, now coming in third with $8.67 billion after surging nearly 150% over the same period. BNB Chain also remains a viable contender, currently hosting $7.26 billion after gaining 67% since the start of February.