US lawmakers question the SEC's dismissal of the Tron lawsuit in relation to Trump investments, as the legality of the IPO faces severe scrutiny.

Two U.S. Congress members recently issued a stern inquiry to the U.S. Securities and Exchange Commission (SEC), demanding an explanation for the timing of the withdrawal of the enforcement case against the founder of Tron, and questioning the legality of its listing on NASDAQ through a reverse merger. This rare direct intervention could have far-reaching implications for how Crypto Assets companies go public in the U.S., while also raising concerns about the independence of regulatory agencies.

Lawmakers question: Does the SEC's dismissal of the Tron lawsuit have ties to Trump's investments?

In a letter to SEC Chairman Paul Atkins and Acting Director of the Division of Corporation Finance Cicely LaMothe on Wednesday, Senator Jeff Merkley and Representative Sean Casten sharply questioned the timing of the SEC's dismissal of the enforcement action against the founder of Tron.

The founder of Tron previously faced a lawsuit filed by the SEC in 2023, accusing him of offering unregistered securities, but the agency requested to pause the case in February, one month after the departure of former chairman Gary Gensler. This timing has raised significant concern among lawmakers.

Merkley and Casten hinted in the letter that the "significant investments" made by Tron founder in cryptocurrency venture capital controlled by U.S. President Donald Trump and his family, including World Liberty Financial and his official meme coin TRUMP, may have influenced the decision to suspend the case.

Tron NASDAQ listing raises national security concerns

Two lawmakers simultaneously questioned the legitimacy of Tron going public on Nasdaq through a reverse merger in July, claiming that this move "poses financial and national security risks" due to its alleged connections with the Chinese government.

"In light of the series of issues arising from the Tron founder's investment in the president's Crypto Assets venture capital and his plans to take Tron public through a Reverse merger process, we urge the SEC to ensure that Tron Inc. meets the stringent standards required for listing on U.S. stock exchanges," the letter stated.

Lawmakers have particularly questioned the application process for Tron to go public through a reverse merger, and whether the SEC can "protect the American public" through any settlement with the founder of Tron.

Market structure legislation may change the regulatory landscape

Although the letter specifically names Tron and its founder, this inquiry may lead to broader scrutiny of other foreign Crypto Assets companies attempting to go public in the United States through similar structures. However, these doubts may become meaningless under the upcoming market structure legislation.

Since Trump took office, the SEC under Atkins has made significant policy adjustments, including the withdrawal of investigations or enforcement actions against multiple Crypto Assets companies. However, the fundamental framework for the committee's regulation and enforcement of digital assets may soon change, considering the Republican plans in Congress.

In July, the Republican-controlled House of Representatives passed the CLARITY Act, which is a bill to establish a market structure for Crypto Assets. The leadership of the Senate Banking Committee has indicated that they plan to create their own version of a market structure bill based on this legislation, which is expected to be signed into law before 2026.

Although the final text of any potential bill remains unclear, many proposed drafts suggest modernizing regulations to meet the requirements of the digital asset industry and establishing clear roles for the U.S. financial regulators SEC and the Commodity Futures Trading Commission (CFTC).

If approved, the final framework could eliminate barriers or affect the way companies like Tron go public on U.S. exchanges.