Judge rules that Justin Sun and his company did not challenge the "common enterprise" element of the Howey test

The SEC’s case against Tron founder Justin Sun has suffered a setback in a ruling by a New York district judge who is working to dismiss the case against him. On August 19, U.S. District Court Judge Edgardo Ramos denied one of the main arguments of the SEC’s lawsuit, which the defendants have been using to dismiss the SEC’s lawsuit. The SEC accused Sun and the Tron Foundation in March 2023 of engaging in “unregistered offers and sales, manipulative trading, and illegal sales of crypto-asset securities” for Tron and BitTorrent (BTT) tokens. The defendants asked to dismiss the lawsuit in April, saying that the SEC has no jurisdiction over “foreign digital assets offered to foreign buyers on a global platform.” One argument they raised in their brief was the “common enterprise” part of the Howey test. The SEC tried to fight back, claiming in an August 12 letter that this was a “new argument” and asking the judge to either not consider Sun’s motion to dismiss or force them to file a “response” addressing the new argument. It argued that the defendants initially challenged only two parts of the Howey test (capital investment and profit expectations), not the common enterprise element. On August 19, Judge Ramos sided with the defendants, arguing that no new arguments were raised, "Given that the defendants admitted that they did not challenge the 'common enterprise' element of the Howey test, the SEC's motion for a letter opposing untimely arguments or permission to file a written response is denied." The case against Justin Sun and his affiliates will continue. One of Justin Sun's main arguments is that "the U.S. SEC is not a global regulator" and that it "goes too far" in its efforts to apply U.S. security laws to "primarily foreign conduct." It also said that the tokens were sold "entirely overseas" and took steps to avoid the U.S. market, and that the SEC did not claim that they were "initially offered or sold to any U.S. resident." (Cointelegraph)