On the other hand, the Tron blockchain is placed under the same problem as the SEC, which has filed charges against Tron (TRX) and BitTorrent (BTT) tokens over their regulatory status, which has been defied by the SEC. Tron challenged the authority of the SEC not only by stating that the SEC’s regulatory reach does not extend to the current activities of the firm and that sending the case to the SEC isn’t right
By a Memorandum of motion filed on March 28, Tron denies the SEC the jurisdiction to act on foreign affairs and digital global currency. They insist that activities like social media advertisements, contests, and free distribution of tokens, which the SEC tries to limit, do not directly concern the States’ markets or investors.
Securities classification dispute
Tron comes to the list of other challenges that the SEC must overcome regarding primary classification, as TRX and BTT fall under the securities category. Indeed, Tether and Pax speak out against their tokens (stablecoins) being treated as securities in the question of investment contracts approach, thus enabling them to escape regulations that define those securities. Tron contends that strict cryptocurrency regulations for securities are missing and that SEC action deviates from fundamental notices and due process principles.
Moreover, Tron relies on the major questions doctrine to challenge the SEC’s one-sided exercise of power and hold it accountable for the illegal expansion of its regulatory rules with no state authority. Through this legislative doctrine, Congress canvassed that bigger policy problems should be handled by Congress rather than by the regulatory agencies with the necessary authority.
The case of Tron, in which the question of regulation in the crypto sector is brought to the limelight, makes this issue visible in the most obvious way. Transparent rules that safeguard the interests of the investors, create room for innovations, and make the crypto market sustainable in the future are critically important.
Background of the lawsuit
The legal proceedings between Tron and the SEC started in March of 2023, wherein one of the Executive agents of TRON, Justin Sun, the TRON Foundation, the BitTorrent Foundation, and Rainberry were sued for violating the Securities and Exchange Commission Act. The lawsuit accuses Sun of being part of the artificial wash trading for TRX, and those, along with the fraud and market manipulation allegations, serve as evidence to support it.
The SEC asserts that Sun conducted more than 600,000 wash trades of TRX between his controlled accounts to misleadingly show it as an active token, owned for some time and with trading volume, to support a sale of more than $31 million worth of tokens.
Allegations against celebrities
Further, the lawsuit entangles some celebrities with colors, like Lindsay Lohan, Jake Paul, and Akon, who were convicted for illegally promoting TRX and BTT on social media without acknowledging illegal interests. SEC claims that the celebrities acting for Tron’s Digital Assets misled the public by not disclosing the commission they get when endorsing the asset, which violates the Securities regulations.
Tron’s Securities and Exchange Commission (SEC) action for the legitimacy of TRX and BTT code in cryptocurrency denotation brings complicated crypto regulation issues. Since the evolution of cryptocurrency seems to have called for a constant regulation-blockchain project conflict, it has only become more common.
The outcome of this lawsuit could have significant implications for the crypto industry and may ultimately help shape regulatory frameworks globally. While the legislation is being wrestled with, the issue of regulatory framework, which should be transparent and appropriate for investor protection and promoting innovations in the cryptocurrency industry, remains important.
