Metaverse casino served emergency stop and refrain from stopping NFT sales
A metaverse casino has been hit with simultaneous cease and desist orders from four state enforcement agencies across the US, which have deemed the firm’s non-fungible tokens (NFTs) to be unregistered securities.
Across two NFT collections offered by metaverse casino Slotie, the tokens are said to offer access to metaverse casino, wagering rewards, revenue sharing from the games, lotteries and native token WATT.
However, regulators do not seem happy with how the platform has marketed the NFTs and its alleged lack of securities registration.
On October 20, Texas, Kentucky, New Jersey and Alabama state securities regulators ordered Slotie to cease and desist operations, citing the platform’s lack of state registration and the offering of unregistered securities via NFTs.
“The actions accuse Slotie of having issued 10,000 Slotie NFTs that are similar to stocks and other shares. The Slotie NFTs allegedly give investors ownership stakes in the casinos and the right to passively share the profits of the casinos,” said a statement from Texas State Securities Board October 20.
The agencies also accused the organization — which it believes is based in Georgia — of providing misleading advertising information and concealing important financial information, among other charges.
The cease and desist order from the New Jersey Bureau of Securities argues that Slotie is offering securities that are not registered with the bureau, “federally covered” nor exempt from registration.
It also accuses the platform of failing to make all required disclosures about operating a gambling platform, while also providing misleading information and failing to register as a broker-dealer.
In particular, the filing questions Slotie’s claims that the first batch of 10,000 NFTs sold out in under five minutes, and the second batch of 5,000 NFTs sold out in under two minutes, noting that there is no ” proof of the blockchain” to support such claims.
“In connection with the offer, sale or purchase of securities, Slotie makes substantially false and misleading statements and/or fails to state essential facts,” the archive states.
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According to an October 20 CNBC report, Texas State Securities Board’s Joe Rotunda warned against metaverse-linked NFTs, noting that “NFTs purporting to provide passive income – often carry significant undisclosed risks,” adding:
“These risks are often significant, and investing in virtual reality can make investors virtually bankrupt.”
The backlash from US government enforcement agencies adds to similar cease and desist orders against Web3 gambling projects Flamingo Casino Club and Sand Vegas Casino Club earlier this year.
Flamingo Casino Club, in particular, was accused by five US government agencies in May of being an operation run by Russian fraudsters who allegedly faked a partnership with a brick-and-mortar casino and lied about buying Metaverse land from hip-hop artist Snoop Dogg.
The United States Securities and Exchange Commission (SEC) has also considered whether certain NFTs can be considered securities.
In March, anonymous sources told Bloomberg that the SEC was investigating NFT creators and marketplaces regarding whether “certain non-fungible tokens […] are used to raise money like traditional securities.”
