A metaverse casino has been hit with simultaneous cease and desist orders from four state enforcement bodies across the United States, who have deemed the firm’s nonfungible tokens (NFTs) to be unregistered securities.
Over two NFT collections offered by metaverse casino Slotie, the tokens are said to offer access to the metaverse casino, staking rewards, revenue split from its games, lotteries, and native token WATT.
However, the regulators don't appear pleased with how the platform has marketed the NFTs and its alleged lack of securities registration.
On Oct. 20, Texas, Kentucky, New Jersey, and Alabama state securities boards submitted orders for Slotie to cease and desist its operations, citing the platform's lack of state registration and the offering of unregistered securities via NFTs.
“The actions accuse Slotie of issuing 10,000 Slotie NFTs that are similar to stock and other equities. The Slotie NFTs purportedly provide investors with ownership interests in the casinos and the right to passively share in the profits of the casinos,” an Oct. 20 statement by the Texas State Securities Board reads.
The agencies also accused the organization — which it believes to be based in the country of Georgia — of providing misleading promotional information and concealing key financial info among other accusations.
The cease and desist order of 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 provide all of the required disclosures of 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 its initial collection of 10,000 NFTs sold out in under five minutes, and its second batch of 5,000 NFTs sold out in under two minutes, noting there is no “evidence on the blockchain” to back such claims.
“In connection with the offer, sale, or purchase of securities, Slotie is making materially false and misleading statements and/or omitting to state material facts,” the filing reads.
As per an Oct. 20 CNBC report, Texas state securities board director Joe Rotunda warned of metaverse-linked NFTs, noting that "NFTs that purport to provide passive income — often bear significant undisclosed risks," adding:
“These risks are often significant, and investing in virtual realities can leave investors virtually broke.”
The pushback from U.S. state enforcement bodies adds to similar cease and desist orders against Web3 gambling projects Flamingo Casino Club and the Sand Vegas Casino Club earlier this year.
Flamingo Casino Club in particular was accused by five U.S. state agencies in May of being an operation run by Russian scammers that allegedly faked a partnership with a physical casino and lied about buying Metaverse land from the hip-hop artist Snoop Dogg.
The United States Securities and Exchange Commission (SEC) has also been looking into whether certain NFTs could be deemed as securities.
In March, anonymous sources told Bloomberg that the SEC was investigating NFT creators and marketplaces regarding whether “certain nonfungible tokens […] are being utilized to raise money like traditional securities.”