In a significant legal setback for the U.S. Securities and Exchange Commission (SEC), a New York judge has dismissed the agency’s request to hold a pre-trial conference or to mandate an additional response in the ongoing securities fraud litigation involving the Tron Foundation and its founder, Justin Sun.

The SEC has alleged that the legal team representing Tron—encompassing the Tron Foundation, Justin Sun, the BitTorrent Foundation, and Rainberry (formerly BitTorrent)—breached procedural norms by advancing an argument inappropriately. Specifically, the SEC accused the defense of introducing a new argument post facto, asserting that the sales of TRX and BTT tokens did not satisfy the “common enterprise” criterion of the Howey Test. This test is the SEC’s established method for determining whether a transaction qualifies as an investment contract.

The Tron defense team, in a sharp rebuttal to the SEC’s Aug. 12 court filing, argued that the agency’s accusations were unfounded and that the SEC was attempting to fabricate a legal controversy. In their letter to U.S. District Court Judge Edgardo Ramos of the Southern District of New York, Tron’s lawyers insisted that their argument centered on the belief that the sales of TRX and BTT failed to meet the third prong of the Howey Test—specifically, the expectation of profits derived from the efforts of others. They contended that the SEC’s request to file an additional reply, known as a sur-reply, was based on a mischaracterization of their argument regarding Howey’s third prong.

Also, read – Bitso Strengthens Security with Coincover Partnership Amid Rising Crypto Threats

The defense further noted that if the SEC were allowed to file a sur-reply addressing the various “common enterprise” tests—issues not previously discussed in any filings—Tron’s legal team would then require a “sur-sur-reply” to articulate their stance on this new matter. Tron’s attorneys criticized the SEC’s three-page request to address what they termed an issue of the agency’s own creation.

Judge Ramos ultimately ruled in favor of Tron’s defense, denying the SEC’s request. The judge’s decision was based on the defendants’ acknowledgment that they were not contesting the “common enterprise” element of the Howey Test, which led to the denial of the SEC’s motion to strike the alleged untimely argument or to file a sur-reply.

A spokesperson for Tron declined to comment, citing the ongoing nature of the legal proceedings.

This ruling represents a notable victory for the Tron Foundation as the SEC continues its broader crackdown on alleged securities violations within the cryptocurrency industry. The outcome of this case could have far-reaching implications for how digital assets are regulated and litigated in the future.