Four state enforcement agencies from different states in the US have simultaneously issued cease-and-desist orders to a metaverse casino after determining that the company’s nonfungible tokens (NFTs) are unregistered securities.
The metaverse casino Slotie is believed to be offering access to the metaverse casino, staking rewards, income share from its games, lotteries, and native token WATT over two NFT collections.
Regulators don’t seem to be happy with the platform’s promotion of NFTs or its purported lack of securities registration, though.
State securities authorities from Texas, Kentucky, New Jersey, and Alabama requested that Slotie cease and desist operations on October 20 in response to the platform’s lack of state registration and its use of NFTs to offer unregistered securities.
“Slotie is accused in the conduct of issuing 10,000 NFTs that resemble stocks and other equities. According to a statement released by the Texas State Securities Board on October 20, “The Slotie NFTs reportedly give investors ownership rights in the casinos and the chance to passively share in the earnings of the casinos.”
In addition to other charges, the authorities said that the group, which they believe to be based in Georgia, gave false information about its products and finances.
The New Jersey Bureau of Securities claims in its cease-and-desist order that Slotie is marketing securities that are neither exempt from registration, “federally covered,” or registered with the Bureau.
It also charges the platform with supplying false information, operating a gambling platform without complying with the necessary disclosures, and failing to register as a broker-dealer.
There is no “proof on the blockchain” to support Slotie’s assertions that its first batch of 10,000 NFTs sold out in under five minutes and its second batch of 5,000 NFTs sold out in under two minutes, according to the filing.
According to the lawsuit, Slotie is “making materially false and misleading statements and/or omitting to state material facts with respect to the offer, sale, or purchase of securities.”
Texas State Securities Board Director Joe Rotunda cautioned against NFTs related to the metaverse, stating that they “frequently pose considerable concealed risks,” according to a story from CNBC on October 20.
Similar cease-and-desist orders against Web3 gambling initiatives Flamingo Casino Club and the Sand Vegas Casino Club earlier this year are added to by the resistance from U.S. state police agencies.
In specifically, Flamingo Casino Club was charged in May by five U.S. state agencies of operating as a Russian fraud organization, fabricating a partnership with a real casino, and lying about purchasing Metaverse land from hip-hop musician Snoop Dogg.
The Securities and Exchange Commission (SEC) of the United States has also been examining the possibility of classifying some NFTs as securities.
According to Bloomberg, which cited unnamed sources in March, the SEC was looking into NFT developers and exchanges to determine whether “some nonfungible tokens […] are being used to raise money like traditional securities.”