According to regulators in Texas, Kentucky, Alabama, and New Jersey, Slotie sold more than 10,000 NFTs to investors in the US and beyond. These NFTs, he claimed, would entitle investors to a portion of the company’s profits, effectively converting them into company stock.
Despite selling securities, the company failed to register them with the US Securities and Exchange Commission (SEC). In addition, it did not provide investors with required information, such as the address, assets, liabilities, and income of the company or founders.
Slotie is based in Georgia and began operations in October 2021, according to the Texas State Securities Board. It still touts its NFTs as investors’ “ticket to the largest and fastest growing online casino network on the blockchain”.
The four watchdogs want Slotie to immediately cease and desist from selling the securitized NFTs until he gets regulatory approval from the SEC. His court filing gives the company a month to request a hearing on the issue. If founders violate the order, they are subject to up to $10,000 in fines.
Commenting on the crackdown, TSSB’s Joe Rotunda said that despite opening up great new opportunities, scammers could still exploit the metaverse to target unsuspecting investors.
“The latest metaverse investment products, NFTs that claim to provide passive income, often carry significant undisclosed risks. These risks are often significant, and investing in virtual realities can leave investors virtually broke,” he said in a media statement.
Slotie is not the first metaverse casino that US regulators have cracked down on. In May of this year, five US state regulators, including the TSSB and the Wisconsin Department of Financial Institutions, filed enforcement actions against Flamingo Casino Club. The project, whose name resembled a legal brick-and-mortar casino based in Las Vegas, claimed to be building a metaverse casino and sold securitized NFTs to finance development. In addition to violating securities laws, the company was heavily linked to Russia.
A month earlier, Texas and Alabama had ordered Sand Vegas Casino Club to stop selling NFTs. The two state watchdogs alleged that the company misled investors into believing that the more than 11,000 NFTs it sold were not securities.
